Now Trending

Avian Securities is out with some interesting comments on news that Sprint (NYSE:S) and Clearwire (NASDAQ:CLWR) have opted to break the agreement to collaborate on a nationwide Mobile WiMAX launch in 2008. They signed the deal just last July ?¹

The announcement last year that Sprint and Clearwire wouldn’t partner on WiMAX after all raised questions whether either company could afford to build a nationwide WiMAX network on its own. Such a move would be hugely expensive, and many analysts believed it was not in the interests of Sprint (which had just lost its CEO and was losing customers) or Clearwire (a startup without enough revenue to fund a full network).²

Clearwire and Sprint, which own the bulk of 2.5GHz spectrum in the country, said in July last year thatthey planned to jointly build a nationwide WiMax network. But in November the companies said they had failed to reach a final agreement, and terminated their letter of intent.³

As expected, the plan would probably involve spinning off Xohm from Sprint — but it could also involve merging that spun-off company with Clearwire. If Google actually bids to win in the ongoing 700Mhz spectrum auction, it could potentially hand over the building of any new networks to the new, well-funded partnership.⁴

No doubt that WiMAX should be a separate company though, as legacy Sprint networks will just drag the whole thing down. Can McCaw raise the money for Clearwire to buy out Sprint?⁵

The deal between the two firms was for them to use complementary spectrum holdings and carry out spectrum swaps to create nonoverlapping network buildouts that would cover the whole country. Sprint would also allow Clearwire to resell its 3G EVDO network, a critical stage in building a roaming business audience.⁶