Sprint alliance to invest billions in wireless network

Broadband effort to use WiMax technology

May 08, 2008|By Cox News Service

NEW YORK - An alliance of top technology and cable companies led by Sprint Nextel Corp. said yesterday that it will invest billions of dollars to build a national wireless network that offers high-speed Internet access for people at home and on the go.

Sprint, the troubled No. 3 wireless carrier, said it will combine its current mobile broadband effort with the work of wireless Internet provider Clearwire Corp., creating a $14.5 billion company called Clearwire.

Microchip maker Intel Corp., Internet search giant Google Inc. and cable providers Comcast Corp., Time Warner Cable Inc. and Bright House Networks would invest $3.2 billion in the network for a 22 percent stake in the company. Sprint would own 51 percent.

The venture, with plans to reach up to 140 million people by the end of 2010, is one of the biggest to chase the tech industry goal of bringing high-speed Internet connections to people wherever they are. It also aims to connect a range of devices including laptops, cameras and media players.

By investing in the network's WiMax technology, which offers greater range than Wi-Fi and speeds akin to cable modems, cable companies are seeking a wireless foothold and a way to fight phone company rivals AT&T Inc. and Verizon Communications Inc.

The cable companies said they will resell the Clearwire service, likely bundling it with their video, phone and wired Internet offerings. They and the new Clearwire also will sell Sprint's current wireless voice and data services.

The deal also comes only days after published reports about major potential changes for Sprint, which has struggled with slowing growth and defecting subscribers. Some reports said Germany's Deutsche Telekom AG, parent of No. 4 carrier T-Mobile, has looked into buying Sprint. Others said Sprint has been considering selling its Nextel unit.

"The company has stumbled over the last few years. This [Clearwire deal] should be a big part of the Sprint Nextel revival," said Jeff Kagan, an independent telecom analyst based in Atlanta. "This is a deal that has too many heavy hitters to fail."

Kagan said the partnerships are key to the effort, since the "companies will not only share the risk, but also the opportunity."

Sprint, based in Overland Park, Kan., had planned a commercial launch of a WiMax service called Xohm this year.

Tested locally

The technology, intended for use in homes, outdoors and in cars at highway speeds, has already been deployed for testing with Sprint employees in Chicago, Baltimore and Washington.

Investors had questioned whether battered Sprint, which has been closing stores and cutting jobs, should take on the expense of building the network, with an initial price tag once estimated at $5 billion.

Sprint chief executive Dan Hesse said deciding what to do with the WiMax effort has been a top priority since he took over in December.

Hesse said working with Clearwire and the investing companies will provide at least a two-year jump on AT&T and Verizon, which are deploying a broadband technology called Long Term Evolution, or LTE.

'All-star team'

"This is an all-star team," Hesse said in a conference call. "It's an unprecedented union that brings top players from several industries together so that collectively we have the expertise and resources to realize the full potential of the next generation of mobile broadband. Just as important, we're positioned to realize it now instead of several years down the road."

The current Clearwire, based in Kirkland, Wash., provides wireless Internet access using a technology similar to WiMax. It has about 400,000 customers in various parts of the country.

The deal to create a new Clearwire is expected to be completed in the fall. It is subject to the approval of federal regulators and existing Clearwire stockholders, who would own 27 percent of the new company.

Regulators will likely approve the deal even though it raises issues such as concentrating wireless airwaves ownership under one company, said Blair Levin, an analyst with the Stifel, Nicolaus & Co. investment firm.

The new Clearwire will also be based in Kirkland. Current chief executive Benjamin Wolff will hold the same title and lead the new company, while Sprint Chief Technology Officer Barry West will be president.

Under the deal, Google will join with the new Clearwire to develop Internet services and advertising for mobile WiMax devices and become the search and preferred applications provider.

Clearwire will also support Google's Android mobile operating system.

Google will become the default Internet search provider for Sprint devices.

Google and Intel, a major WiMax backer, have the option to become wholesale providers of the Clearwire service.

An earlier partnership between Sprint and five cable firms collapsed this year.

The new partner investments are: Comcast ($1.05 billion), Intel ($1 billion), Time Warner Cable ($550 million), Google ($500 million) and Bright House Networks ($100 million).

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