Sprint Nextel nixes WiMAX plans with Clearwire

Nov 9, 2007 3:11 PM, By Donny Jackson

In a blow to the WiMAX industry in the U.S., Sprint Nextel and Clearwire today terminated their letter of intent to jointly build and operate a nationwide mobile WiMAX network on the companies’ complementary 2.5 GHz spectrum assets.

For Sprint Nextel, the announcement comes on the heels of the departure of CEO Gary Forsee and a quarter that saw the company lose more than 300,000 post-paid customers. The company’s stock price has fallen more than 30% since June.

Contributing to investors concerns’ about Sprint was the notion that the carrier would spend billions of dollars on a mobile WiMAX network in a partnership with Clearwire, with which it signed a letter of intent in July. The joint network was designed to leverage the 2.5 GHz spectrum both companies owned while limiting their buildout costs of what Forsee described as a 4G network.

However, last month the International Telecommunications Union (ITU) determined WiMAX to be a 3G standard, an official declaration that substantiated the beliefs of many industry analysts.

“[WiMAX] is not this panacea that solves everything,” Roger Enter, senior vice president of communications for IAG Research, said during an interview with MRT. “It is just another wireless technology that fights on an even—or slightly-tilted-against-them—playing field, because the others have an installed base, and the cost advantages are that dramatic. If it was as good as the hype says, we wouldn’t have this conversation.”

Sprint Nextel spokesperson Leigh Horner reiterated the carrier’s plans to deploy WiMAX, with a soft launch late this year in the Chicago and Baltimore/Washington, D.C., markets and commercial launches in 2008. She also noted that the carrier is required to build out services on its 2.5 GHz spectrum that offers services to at least 30 million potential customers in at least 20 U.S. markets, a condition of the Sprint-Nextel merger.

However, both Entner and wireless industry consultant Andrew Seybold said the long-term fate of Sprint Nextel’s WiMAX project will be decided by Forsee’s successor as CEO, who may not see a great deal of value in pursuing a WiMAX network beyond the FCC-required buildout.

“WiMAX as a competitor to existing carriers makes no sense,” Seybold said during an interview with MRT. “As a competitor to DSL and cable, it makes no sense. For backhaul, for point-to-multipoint and for rural America, it makes a lot of sense, but there is no competitive advantage to WiMAX compared to EV-DO Rev. A or UMTS HSPA.”

Meanwhile, the entity hurt most by the announcement is Clearwire, which now has no clear path to establishing a nationwide network on 2.5 GHz spectrum, Entner said. It also is a problem for chipmaking giant Intel, which has expended considerable resources promoting WiMAX as a next-generation wireless solution, he said.

“Intel needs WiMAX more than the world needs WiMAX, so I think Intel will push and push and push even more than they have before,” Entner said. “They are the large financing arm behind Clearwire. This is clearly a defeat for Intel and for [Clearwire Chairman and CEO] Craig McCaw, for that matter.”