Uncertainty Trails WiMAX as Sprint and Clearwire Terminate Partnership

The long-term future of WiMAX technology came under the spotlight on Friday (9 November) as the leading U.S. proponents, Sprint Nextel and Clearwire, terminated their agreement to collaborate on the roll-out of a nationwide WiMAX network. In an announcement, the two companies said they were scrapping their agreement to build out a WiMAX network as they could not resolve the complexities of the transaction and could not reach agreement on the terms of the deal. However, Sprint insisted that it remains fully committed to developing WiMAX services and will continue to work together with Clearwire on future wireless opportunities. Both parties announced a deal to collaborate on WiMAX roll-out in July 2007, sharing the costs for the network that is targeted to reach 100 million users by the end of 2008, and with each side providing roaming rights for the other's customers. Beyond 2008, Sprint was to deploy a network that would cover a population of 185 million, including 75% of the population in the top 50 markets, while Clearwire would build out coverage for a population of 115 million (see United States: 20 July 2007: Sprint and Clearwire Announce WiMAX Partnership).

Prior to announcing their partnership, Sprint and Clearwire had projected themselves to the top of the WiMAX agenda with separate announcements about their WiMAX strategy. Sprint outlined its plans to spend up to US$5 billion by 2010 to build out a WiMAX network, identifying WiMAX as its flagship next-generation, high-speed mobile technology. For its part, Clearwire has built its business around WiMAX and had secured funding to push through with an ambitious network roll-out (see United States: 6 July 2007: Clearwire Completes US$1-bil. Senior Secured-Term Loan and 9 August 2006: Sprint Outlines Plans for Nationwide WiMAX Network).

Outlook and Implications

• A Blow to WiMAX:The end of the Clearwire-Sprint partnership is the biggest blow so far to the development of WiMAX across the world. The deal was to have been the icing on the cake for a technology that was being touted as the perfect platform for ubiquitous mobile broadband services. As the hype persisted, funding was no longer an obstacle, with heavy-pocketed investors wading in to catch a piece of the WiMAX action. Even the International Telecommunication Union (ITU) caved in to include WiMAX in the IMT-2000 portfolio of standards that constitutes what is commonly referred to as 3G. However, things began to go awry not long ago, as Sprint's projections for customer numbers for its Xohm WiMAX project came under the spotlight, with the company finally downgrading its projections. Worse still, a further run of bad results from the company's existing businesses raised questions about the rationale of committing so much investment to WiMAX, leading eventually to the departure of the company's chief executive. Dow Jones reports that Sprint's board considered a variety of options for the Clearwire partnership, resolving eventually to terminate the partnership and allow a new chief executive to chart a course for the company's WiMAX business plan. Clearwire, for its part, has struggled to remain profitable, with third-quarter 2007 net loss widening to US$329 million, despite revenue jumping to US$41 million (see United States: 9 October 2007: Sprint Begins Search for New CEO as Post-Paid Losses Continue).
• Vested Interests to the Rescue:Despite the problems plaguing Clearwire and Sprint, the involvement of some deep-pocketed players is likely to offer a lifeline to continued development of WiMAX services across the world. Intel is already a major player in the WiMAX market and is involved in various global trials. Motorola, Nokia, ZTE and Samsung are also key players, and were expecting a slice of Sprint's multi-billion dollar WiMAX investment. Cisco was a latecomer to the WiMAX domain, but the world's leading internet gear manufacturer declared its WiMAX intentions boldly with the purchase of Navini Networks for US$330 million in October 2007. These mainly equipment vendor companies have a vested interest in identifying a new WiMAX product-line to add to their product portfolio. Expectedly, any implosion of WiMAX development will lead to accusations that these companies have backed the wrong technology, bringing with it questions about their savvy in identifying promising technologies, and their astuteness in avoiding seemingly hopeless causes. Given this wider ramification, these players are unlikely to allow the death of the Clearwire–Sprint partnership to rock the WiMAX surge, and may well commit funds to keep the U.S. nationwide WiMAX roll-out on track (see World: 24 October 2007: Cisco Buys Into WiMAX with Navini Networks for US$330 mil.and United States: 17 August 2007: Sprint Releases Plans and Targets for "Xohm" WiMAX).