Report: Cable companies mull WiMAX link-up with Sprint Nextel, Clearwire: Comcast, Time Warner could put millions into new venture

Sprint Nextel Corp. and Clearwire Corp. are in discussions with the nation’s two largest cable providers — Comcast Corp. and Time Warner Cable Inc. — to fund a nationwide WiMAX venture, according to the Wall Street Journal. Intel Corp., Google Inc. and Bright House Networks may also contribute to the effort.
Sprint Nextel’s new chief, Dan Hesse, is hoping to wrap up the deal in time to officially announce it at next week’s CTIA Wireless 2008 trade show in Las Vegas, according to the article, which cites unidentified sources.
“We would venture an educated guess that a Sprint/Clearwire deal will not be wrapped up in time for Hesse’s CTIA keynote speech next Tuesday, which unfortunately will leave him in the unenviable position of talking about the current state of his company,” wrote Pali Research’s Walter Piecyk in a post this morning. “That alone should shed light on why Hesse might be motivated to try and enforce a CTIA deadline.”
The news provided a slight boost to the share price of Sprint Nextel, while Clearwire watched its stock jump almost 7% in trading this morning.
If the deal comes to pass, it would stand as the latest major wireless push by the nation’s cable providers. Comcast and Time Warner, along with Bright House and Cox Communications Inc., joined forces with Sprint Nextel in 2006 to bid on advanced wireless services spectrum in the Federal Communications Commission’s Auction 66, wining around $2 billion worth of licenses. However, the spectrum so far remains used.
After the AWS auction, the cable companies formed a joint venture with Sprint Nextel, dubbed Pivot, to sell branded cellular services running over Sprint Nextel’s CDMA network. However, that effort ground to a halt following tepid demand.
Thus, it’s clear that the nation’s major cable vendors are keen on a wireless angle — and are willing to partner with Sprint Nextel — but have yet to land on a successful business model.
According to the Wall Street Journal, Sprint Nextel and Clearwire are attempting to raise $3 billion to build a nationwide WiMAX network. Comcast and Intel may pledge up to $1 billion each, while Time Warner would dole out $500 million. Bright House and Google may each offer several hundred million dollars.
Sprint Nextel and Clearwire’s current efforts follow the collapse last year of their previous WiMAX partnership, which included a joint network deployment worth a total of $5 billion. The companies have said, though, they remain committed to working together on WiMAX in some fashion.
There area a variety of factors pushing each of the current players. Sprint Nextel has been floundering for months with sluggish subscriber additions and declining finances; a successful WiMAX outing would go a long way toward mollifying the company’s investors. The same likely is true for Clearwire.
For their part, Comcast, Time Warner and Bright House may have gotten an added nudge from the recently ended 700 MHz spectrum auction. While none bid on spectrum, cable rival Cox and satellite competitor EchoStar did; indeed, EchoStar’s E-Block winnings stretched across much of the continental United States. Thus, Comcast, Time Warner and Bright House may see a WiMAX joint venture as a way to counter rivals’ wireless moves and put to use their AWS spectrum.
“We clearly have no idea when a deal will be reached between Clearwire and Sprint nor which strategic investors will ultimately be involved,” wrote Pali Research’s Piecyk. “We believe that Sprint would like to maintain control of the WiMAX business, which might be difficult if they plan on mortgaging the capital investment of a nationwide buildout to a laundry list of strategic equity investors that includes Intel, Google, Comcast, Time Warner and Best Buy. These are sophisticated strategic investors that we believe will not only have specific buildout requirements or attractive wholesale agreements but are also unlikely to value Sprint and Clearwire’s spectrum, which is largely leased, at the same per MHz/pop value that was paid in the recent auction of 700 MHz spectrum.”