The Sprint/Clearwire Breakup

By Jeff Goldman

November 20, 2007

Sprint and Clearwire have terminated their agreement to work together on WiMAX--but both insist it’s not the end of the road for the technology, or for their plans to implement it.

On Friday, November 9th, Sprint and Clearwire announced the termination of their letter of intent (LOI), signed in July, to work together on a nationwide WiMAX network. As a Sprint press release explained at the time, “The two companies could not resolve complexities associated with the LOI and failed to reach final agreement on the terms of the transaction.”

Vague enough for ya? That’s about as specific as either company is willing to get.

“We found more complexity than we were comfortable with in trying to create a seamless customer experience, and we were unable to execute the letter of intent in a way that would have meant a simplified user experience for Xohm customers,” says Sprint spokesperson John Polivka.

Clearwire CEO Ben Wolff was a little more forthcoming about the companies’ motivations in a Q3 earnings call on the 9th when he stated, “Sprint is going through a period of significant change with a focus on simplifying its business, and Clearwire needs to move forward with its business and strategies.”

Former Sprint CEO Gary Forsee was the company’s biggest cheerleader for WiMAX--and when he left the company last month amid Sprint’s reorganization, Sprint’s priorities clearly changed.

“We need to be free to pursue other strategic opportunities that further Clearwire’s goals and objectives,” Wolff said. “These opportunities may include other strategic transactions and/or partnerships, which may or may not include Sprint in the future.”

Still, both companies insist that WiMAX remains a focus, and that they continue to look for ways to work together.

“We are continuing to discuss with Sprint how to best collaborate on the deployment and operation of a mobile WiMAX network in the U.S.,” Wolff said. “I can’t tell you at this time whether we will ultimately reach an agreement with Sprint, or if we do, what form such an agreement might take. But I can tell you that at least from our perspective all of the reasons that supported our original decision to enter into the letter of intent remain.”

Polivka says Sprint will continue with its WiMAX plans, with or without Clearwire.

“We are moving forward and remain committed to the WiMAX project,” he says. “We are preparing for soft launch of the service (with employees) by year end in Chicago, Washington D.C., and Baltimore in advance of commercial Xohm service, set to begin in certain cities in the second quarter of 2008.”

ABI Research senior analyst Philip Solis says that’s a good move on Sprint’s part--Solis says WiMAX is “the best thing they have going for them that can give them a real (as opposed to a perceived) competitive advantage. They would be able to offer services on a wider array of devices, attracting more subscribers--even if they stay with a competitor for their voice/handset service.”

If, on the other hand, Sprint were to choose to spin off its Xohm WiMAX division, Solis says the new company “would need a lot of investment from outside sources. Google and Intel are key companies that would be keen to invest here if this is the case. Perhaps Craig McCaw wants all the 2.5 GHz spectrum for himself and wants to purchase the spun off WiMAX unit--of course, the spectrum is probably valued into the tens of billions of dollars, so Clearwire will not be able to do it by themselves.”

Regardless, Solis says the Sprint/Clearwire breakup shouldn’t give anyone cause to worry about the future of WiMAX itself as a technology.

“At this point, there is so much momentum around WiMAX chipset vendors, WiMAX equipment vendors, what service providers are doing around the world, spectrum auctions suitable for WiMAX, how Cisco will drive WiMAX, and how Intel is driving WiMAX into laptops, that I think this will be a relatively isolated incident,” he says.

Jeff Goldman is a freelance writer and photographer based in Los Angeles, California. In addition to his work for Wi-FiPlanet, he writes for Jupitermedia's ISP-Planet, UWB Planet, and VoIP Planet. He blogs about the wireless industry at Wireless Weblog.



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