Sprint, Clearwire Create $14.5B WiMax Giant

At last, it's back on.

Sprint Corp. (NYSE: S) and Clearwire LLC (Nasdaq: CLWR) are pooling their WiMax assets to create a new, independent company that, with the help of a number of big-name backers, plans to build a national mobile broadband network for the U.S., "designed to unlock the potential of Clearwire's and Sprint's 4G assets." (See WiMax Wednesday? and Sprint, Clearwire Form WiMax Giant.)

The new company, to be called Clearwire, has a target share price of $20. At that initial investment price, Sprint, which is contributing its Xohm assets to the new company, will own 51 percent of the venture, while the current shareholders of Clearwire, which is folding all of its current assets into the new company, will own 27 percent.

The news gave Sprint's stock a $0.33 (3.6 percent) boost to $9.52 in pre-market trading Wednesday morning, while Clearwire's stock leaped $1.94, or 11.8 percent, to $18.40.

The remaining 22 percent stake will be held by a group of five investors -- Google (Nasdaq: GOOG), Intel Corp. (Nasdaq: INTC) (through Intel Capital ), and three cable operators, Bright House Networks , Comcast Corp. (Nasdaq: CMCSA, CMCSK), and Time Warner Cable Inc. (NYSE: TWC). Together, those five companies, known as the "strategic investors," are to invest $3.2 billion in the new WiMax company, giving it a corporate value of nearly $14.55 billion.

In addition, the strategic investors have agreed on a "series of commercial agreements with the strategic investors, including 3G and 4G wholesale agreements" with Sprint and Clearwire. That gives Comcast and Time Warner Cable a new wireless arrangement to play with, following their exit from the doomed "Pivot" venture with Sprint that collapsed recently. (See MSOs Pivoting Away From Sprint JV.)

The investors also have specific roles to play to help the new company attract customers:

  • Intel will embed WiMax chips into laptops and mobile devices running Centrino 2 processors.
  • Google will develop Internet and advertising services and tailored applications for WiMax devices, and create an "open Internet business protocol" for the devices, while Clearwire devices will support Google's Android device operating system.
  • Sprint, Comcast, Time Warner Cable, and Bright House Networks will wholesale Clearwire's WiMax services to sell to their customers, while Google and Intel have the option to do so in the future.
In addition, Sprint and Google have struck a deal by which Google will become the default provider of Web and local search services for Sprint's mobile services. Sprint will also preload several Google services, including Google Maps for mobile, Gmail, and YouTube, on certain mobile devices and "provide easier access to other Google services."

A further investment of $10 million in the new venture's stock will be made by Trilogy Equity Partners, an investment firm founded and led by former T-Mobile US Inc. and Western Wireless CEO John Stanton. (See T-Mobile USA Names CEO .)

The wait is over, hopes are high
The formation of a new Sprint/Clearwire Wimax venture has been on the cards for months, and an announcement had been expected at the CTIA tradeshow in early April, but, according to sources, the partners had been struggling to agree on final terms. (See Clearwire & Sprint: On Again?, Clearwire Q4 Drops, WiMax News Doesn't, and Clearwire's Rumor Ride.)

Now, though, a deal has been concluded, and the founders have high hopes for the new venture, which will have current Clearwire chairman Craig McCaw as non-executive chairman, Ben Wolff (current Clearwire CEO) as CEO, and current Sprint CTO Barry West as president.

In the official release announcing the new company, McCaw stated: "We believe that the new Clearwire will operate one of the fastest and most capable broadband wireless networks ever conceived, giving us the opportunity to return the U.S. to a leadership position in the global wireless industry."

The aim, clearly, is to build a significant WiMax customer base before mobile operators such as AT&T Inc. (NYSE: T) and Verizon Wireless get their LTE-based 4G networks up and running (2010 at the earliest). (See AT&T & Verizon to Use 700 MHz for 4G .)

"It is expected that the new Clearwire will have a time-to-market advantage over competitors in fourth-generation services, supported by strong spectrum holdings and a national footprint," noted Sprint and Clearwire today. "Further, it will build on the strong foundation of Clearwire's rapidly growing subscriber base of nearly 400,000 wireless broadband customers as of year-end 2007, as well as Sprint's continued XOHM WiMAX network build-out in certain markets throughout this year." (See XOHM May Launch This Summer.)

The cash injection from the five strategic investors will be used to build out a network that, the new company estimates, will reach between 120 million and 140 million U.S. citizens by the end of 2010.

But that concerted and unified push won't start until later this year because, while the deal has been approved by all the investors, the final signoff is still subject to approval from Clearwire's shareholders and the Federal Communications Commission (FCC) , among others. The new company is expected to be formed in the fourth quarter of this year.

— Ray Le Maistre, International News Editor, Light Reading

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freetoair 12/5/2012 | 3:41:08 PM
re: Sprint, Clearwire Create $14.5B WiMax Giant you are right on...Intel buys the spectrum and not an operator? I understand Intel is tryig to be a "market maker" but it has gotten to the point of desperation!
jepovic 12/5/2012 | 3:41:08 PM
re: Sprint, Clearwire Create $14.5B WiMax Giant Yes, it's interesting. They say that they do not want to become an operator themselves, but will try to find someone who do want to. Trying to compete with your customers is rarely wise.

The four LTE licenses went for circa 100 MUSD (all four went to the biggest for mobile operators), while Intel paid less roughly a quarter for the only Wimax license. I doesn't seem like a good sign when Intel themselves are the highest bidder, rather than an operator.
telcofortwo 12/5/2012 | 3:41:07 PM
re: Sprint, Clearwire Create $14.5B WiMax Giant Now, think about this: with Verizon, AT&T and eventually TMobile going the LTE way, from the networking point of view Sprint has yet another issue:
When (or if) it finishes integrating iDEN to CDMA, it will be time for yet another technology decision:
- LTE (and basically bolster the case for being acquired by VzW or AT&T),
- or hand-off what's left of their subscriber base to Clearwire, a leaner venture that does not carry the weight of the KC vs Virginia issues and its huge cost structure.
Either way, Sprint may put itself out of business in 5-6 years..... and that if they can stop the subscriber hemorrage.
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