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Updated: Sprint, Clearwire kill WiMAX venture; future deal still possible


The proposed venture that would marry Sprint and Clearwire’s WiMAX assets has been canceled as the two companies were unable to come to terms quickly enough, Clearwire said today. The companies will therefore launch their WiMAX networks and services separately next year, but Clearwire said the two companies will continue to discuss future partnership possibilities, though none are likely to be as extensive as the their original plans.

In Clearwire’s 3rd quarter earnings call today Clearwire CEO Ben Wolff said both he and then Sprint CEO Gary Forsee believed in July the two operators could easily reach an agreement that would create a nationwide WiMAX operator with massive spectrum holdings and a footprint spanning both large metro and mid-sized U.S. markets. Forsee, however, left Sprint under growing criticism of Sprint’s poor financial and operational performance. Sprint turned its attention to its own internal problems and the joint venture negotiations drug out, Wolff said, but under the terms laid out in the letter of intent the two companies signed, Clearwire wasn’t able to look for other partners. So the two companies agreed to kill the letter of intent.

“We need to be free to pursue other strategic opportunities,” Wolff said.

Wolff did not say if Clearwire had any other possible WiMAX deals in the works. He did, however, caution that Clearwire’s relationship may not be entirely dead. By canceling the letter of intent, the original ambitious deal may be off the table, but the two companies could reach other terms, Wolff said, though he did not elaborate on what those terms might be.

One possibility is for Clearwire and Sprint to enter into a standard roaming agreement, allowing their customers to move freely onto each others networks. Since Sprint primarily plans to launch its WiMAX networks in major metro markets, and Clearwire is targeting mid-sized cities, a roaming agreement would effectively create the nationwide network the originally discussed without the complex network integration. But Oliver Wyman director Ranjan Mishra said we shouldn’t be too quick to dismiss a possible rejuvenation of the joint venture in the future.

Mishra said the two companies likely prematurely announced their plans in July without first fully addressing the operational, strategic and technological complexities involved in such a deal. “Just because they couldn’t figure out that complexity today, doesn’t mean they can’t work them out tomorrow,” Mishra said. “Both companies are in the infant stages of WiMAX right now. There may be a genuine need for more time to work out these issues.”

After Sprint finishes its management changes, Mishra said, the new CEO may decide on a different direction for the WiMAX service, which may not have gelled with the deal it was poised to strike with Clearwire. Once Sprint’s strategy for WiMAX is cemented, it’s likely to reopen discussions with Clearwire, he concluded.

Until that time though, Clearwire is pursuing its own network launch under the assumption it is operating as a solo entity. Clearwire officials said at their earnings call it will resume development in markets it would have ceded to Sprint under the venture, launching them in 2009 instead of 2008. The company is also on track to launch its first commercial WiMAX launch in mid-2008 in unspecified markets. Presumably one of those markets will be Portland where Clearwire has conducted its first WiMAX-compliant trials, using investor Motorola’s mobile WiMAX gear. The company has also launched commercial nomadic service using proprietary gear from its former subsidiary NextNet.

Sprint’s plans sans Clearwire, aren’t quite as clear though. The troubled carrier issued a statement saying that the company was on track to turn on its trial in two markets by the end of the year, but it rather ominously stated it would also be reviewing its WiMAX plans and outlook and wouldn’t be commenting further on those plans until early next year.

“We are on track for soft launch late this year in the Chicago and Baltimore/Washington markets and commercial launch in 2008,” said Keith Cowan, Sprint`s president of strategic planning and corporate Initiatives, in the statement. “In line with Sprint`s mandate of improving the customers experience and simplifying our operations, we look forward to working with Clearwire on opportunities such as roaming and standards.”

Last week, Sprint reported not only more customer losses on its CDMA network, but also that its capital expenditures on WiMAX came in lower than it projected. Sprint spent only $73 million on the WiMAX rollout in the 3rd quarter, a tiny fraction of the $2.5 billion to $3 billion it projected spending on the national deployment throughout 2007 and 2008. Furthermore, after agreeing to partner with Sprint had re-evaluated its original plan to cover 100,000 people in the new WiMAX umbrella. By combining assets with Clearwire, Sprint could have deployed its network in fewer markets and spent less on equipment, but would have achieved the same coverage. With the Clearwire venture deal canceled, it’s unclear whether Sprint will ramp up its spending to capture the full scope of its original rollout plans.


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