By Scott Moritz
WiMax is facing a now-or-never moment as Sprint (S) and Clearwire (CLWR) try to finalize terms of a multi-player joint venture.
Nearly five months into his job as Sprint chief, Dan Hesse has a chance to set Sprint free from an expensive network buildout commitment, and simultaneously spark the WiMax revolution. Sprint and Clearwire are set to announce the formation of a WiMax joint venture involving Comcast (CMCSA), Time Warner Cable (TWC) and funding from Intel (INTC) and Google (GOOG). The announcement could come as early as 6 a.m. Wednesday, according to one source familiar with the plan. Sprint and Clearwire shares surged 7% Tuesday afternoon on raised expectations of an announcement.
It is also possible that the deal could come later, or never, if the parties can’t ultimately agree on who controls the network. Google, for example, has been a uneasy participant, say people familiar with the company. The other players would like to attach Google’s winning name to this ambitious project, but apparently the Net giant has waffled in recent weeks, backing out at one point, then opting back in.
Those watching the unsteady progress of WiMax can’t be brimming with confidence after watching other tech deals disolve. As Microsoft’s three-month failure to woo Yahoo proved, lots of big egos, some forceful approaches and a weakening economy don’t add up to easy negotiations.
Once heralded as the next big thing in mobile broadband, WiMax was to be the successor to WiFi, an untethered Net connection that would usher in a new generation of mobile devices and portable applications.
There have been a couple bumps along the road to WiMax success however. The development of a national network operating on a unified standard has largely been in the hands of two disappointing tech shops: Sprint and Clearwire. The second setback is that the two largest wireless players, AT&T (T) and Verizon (VZ), are pursuing a different technology, called long term evolution or LTE.
The WiMax move would also help move Sprint further down the split-up path. Hesse, with the urgings of some of Sprint’s bigger investors like Ralph Whitworth of Relational Investors, has been mulling a breakup of the No.3 wireless shop. Among the options is the sale of Nextel’s iDEN network, reported to have caught the interest of former Nextel co-founder Morgan O’Brien who runs a public safety networking venture called Cyren Call.
Another step would be the sale of Sprint’s long-distance business, the Global Markets Group. While some analysts say separating the company’s seemingly core network would be nearly impossible, others argue that Sprint is not in a position to turn down any offers at this point.
But the first piece of the splinter strategy for Sprint is WiMax. Hesse inherited the WiMax business, known as Xohm when he took over the CEO job left by Gary Forsee. Forsee staked the company’s future on the promising mobile wireless broadband technology. But the $5 billion cost to build a WiMax network was too much for Sprint, already beset by massive customer defections stemming from its failed merger with Nextel.
The pairing of Sprint’s spectrum and WiMax technology with Clearwire was proposed last year. Sprint needed to get the costs off its books and Clearwire needed a big partner to help make WiMax happen and lend some financial support.
Intel Capital holds about a 25% stake in Clearwire. Clearwire founder Craig McCaw is the largest single shareholder, with a majority of the outstanding shares.
Comcast and Time Warner Cable have identified wireless broadband as a huge opportunity to deliver services like video and calling to a new generation of mobile devices. Last week Comcast raised $2 billion in a bond sale that analysts say signals the Philly cable giant’s readiness to jump into the WiMax venture.
Intel and Google have high hopes that a new national network would open up a mass market for their products and services.
Without this bold joint venture alliance, WiMax faces a bleak future, as other fourth-generation technologies gain ground. The deal could save WiMax from being another promising yet soon forgotten new next thing.
