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As anticipated, the nation’s two largest WiMAX players, Sprint Nextel and Clearwire, are joining to construct the first seamless nationwide mobile broadband network.
Because the proposed alliance includes the exchange of selected 2.5 GHz spectrum, it is subject to review by the Department of Justice and the FCC.
If everything works out as planned within the next 60 days, the allied companies expect to improve the technical and financial positions of their buildouts with Sprint assuming about 65 percent of the footprint.
Sprint expects the network sharing agreement to "provide meaningful savings in initial capital and operating costs in launch of services," said Gary Forsee, chairman-CEO of Sprint Nextel. "As you think about the impact on Sprint's overall economics, we will be owning and operating a smaller footprint than if we were to build out this entire network on our own."
The cap ex savings will not necessarily extend to Clearwire which will "anticipate the need to raise additional capital" to fund its new capital needs, according to Ben Wolff, Clearwire's CEO.
Sprint originally announced plans to roll out mobile WiMAX to 100 million POPs by the end of 2008. Those plans, including the initial deployments of service in Chicago, Baltimore and Washington, D.C. in the first quarter of next year, are moving ahead, although Sprint will no longer be building to all 100 million POPs. Eventually, the two companies plan to roll out to 300 million POPs, of which Sprint Nextel would be responsible for 185 million and Clearwire 115 million.
The arrangement's complexities have yet to be fully fleshed out, but Clearwire, in its operating regions, "will be able to leverage Sprint’s existing infrastructure, giving us the ability to sell services over Sprint's 3G networks and providing Clearwire with access to over 500 Sprint Nextel retail outlets," said Wolff, noting that the arrangement should "further reduce our expense through access to Sprint's cell towers, fiber network and other assets as well as through efficiencies that will result from joint purchasing arrangements."
In the U.S., the two companies will also deal with the intricacies of Sprint’s various customer relationships and, importantly, its wireless joint venture (JV) with cable operators Comcast, Cox, Time Warner Cable and Advance/Newhouse. That agreement covers work with 3G wireless but could be extended to WiMAX, which Sprint Nextel is calling 4G, if certain qualifications are met.
"There are avenues for them to participate in the WiMAX products and service delivery and we'll look forward pursuant to this agreement to describing our capabilities to those partners," Forsee said.
Sprint maintains that mobile WiMAX is complementary to wireline broadband services. Clearwire's position has never been quite so definite.
"By working together (with Sprint Nextel), a nationwide network becomes possible … a unified network that is capable of competing with both wireline and wireless services, thereby enhancing services for consumers and increasing competition," Wolff said. "The rationalization of our spectrum positions will create a depth of wireless broadband spectrum in our operating regions that will be second to none, enabling each of us to offer enhanced services and capabilities that are well beyond the capabilities that either company expected to be able to offer on its own."
The pact touches international markets where Clearwire owns spectrum covering about 200 million people in Germany, Spain, Romania, Poland and Ireland as well as partnership in Denmark and Mexico, Wolff said.
"We have some tremendous opportunities in front of us internationally and we will give you more definition around what those buildouts are in coming months," he said.
More definition, in fact, will be forthcoming on a number of issues, including dual-mode CDMA-WiMAX devices, now Sprint Nextel labs; specifics on infrastructure and backoffice consolidation; and how signals will roam between Clearwire and Sprint Nextel territories.
Finally, importantly, the two companies will work out a "common service brand," Forsee said, where Sprint Nextel "will take the lead in marketing this service to national accounts and potential MVNO and wholesale-type partners."
The letter of intent and its implications, Forsee emphasized, are still works in progress.
"There will be governance and processes put in place; there will be joint development that will occur ... license arrangements which are contemplated in the agreement, all of which will be under the banner of reflecting a national seamless experience for customers. We have negotiated some of those areas very specifically, others, from an operational detail, are in front of us, but we have contemplated the activities and the brand being a piece of that," he concluded.
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