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Sprint chief Dan Hesse at the CTIA Wireless show last month. Source: Reuters |
Sprint Nextel (NYSE: S) has been preaching the merits of WiMAX for years, often noting that the wireless broadband technology will soon be a national reality. For just as long, however, Sprint’s ambitious WiMAX plans have failed to pan out, stymied by criticism and business difficulties.
That could all change after today, with the wireless carrier joining forces again with former partner Clearwire in a massive, $14.5 billion joint venture to create a national WiMAX carrier.
A handful of other giants in the ISP and Internet space have also signed on as backers. Those investors, who include Intel, Google, Comcast, Time Warner Cable and Bright House Networks, will pump approximately $3.2 billion into the new company.
The deal is expected to close during fourth quarter.
Once complete, the new WiMAX carrier will be known simply as Clearwire. The venture’s backers said the Clearwire WiMAX network could provide service for up to 140 million people in the U.S. by 2010.
The deal will initially value the new Clearwire at a share value of $20 per share. Sprint will hold a 51 percent stake in the entity while existing Clearwire (NASDAQ: CLWR) shareholders will own 27 percent.
Intel’s (NASDAQ: INTC) Intel Capital unit, Google (NASDAQ: GOOG), Comcast (NASDAQ: CMSCA), Time Warner Cable (NYSE: TWC) and Bright House will split the remaining 22 percent.
Sprint, Comcast, Time Warner Cable and Bright House will become the wholesale providers for the Clearwire as part of the agreement.
For Intel, the investment in Clearwire will aim to push its embedded WiMAX chips into a broad array of consumer technology devices.
For Google, the stakes are also high. The company, no stranger to WiMAX after partnering with Sprint more than a year ago, will become the default search provider for the new Clearwire WiMAX service.
Additionally, it will work with Clearwire to develop mobile WiMAX applications as well as advertising services for the new network.
Google’s participation will also be a major win for the search leader’s Android open wireless device effort. According to the companies, Clearwire will support Android on the devices that run on the WiMAX network.
Part of the impetus for the new combined entity is the simple fact that the new Clearwire will leverage the existing Sprint and Clearwire wireless infrastructure deployments. As a result, the new combined entity will have a broader geographical footprint that will reduce the overall capital that either partner would have had to invest on their own.
[cob:Special_Report]Sprint and Clearwire had previously announced that they would partner on WiMAX in a deal that ultimately
fell apart, with Sprint executives citing unspecified “business complexities” and pledging to re-evaluate the company’s closely watched WiMAX plans.
Sprint has been making major investments in WiMAX beginning in 2006. Those efforts eventually coalesced into plans for own WiMAX network, which it planned to market under the brand name XOHM, and into which it had pledged to pour $5 billion — a daunting figure that earned the carrier no small amount of criticism from shareholders.
Still, the company stuck to its guns. At the NXTcomm trade show last year, Sprint Nextel CTO Barry West boasted that he expected Sprint to be the leader in WiMAX space.
Executives similarly painted today’s announcement as making good on those early initiatives.
“We’ve made an excellent start developing XOHM WiMAX services,” said Dan Hesse, Sprint’s president and CEO, in a statement. “This is an opportunity to unlock and bring visibility to the value of our significant spectrum assets, technology and expertise, by leveraging the technology, applications and distribution strengths of our investors, who together command nearly a half-trillion dollars in market capitalization.”
