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Friday, November 9, 2007

Sprint Nextel’s WiMax partnership axed

Sprint Nextel’s WiMax partnership axed

The future of Sprint Nextel’s ambitious plans to roll out a nationwide wireless broadband network based on an emerging 4G technology called WiMax was cast into further doubt on Friday after the struggling US mobile carrier cancelled plans for a WiMax partnership with Clearwire.

The decision came just a month after Gary Forsee, Sprint Nextel’s former chief executive and architect of its WiMax strategy, resigned under pressure from the board.

The news sent Clearwire shares down more than 22 per cent to $14 in early trading. The WiMax provider founded by Craig McCaw, the US wireless industry pioneer, posted a sharply higher quarterly loss but reported service revenues that more than doubled to $41.3m compared with the same period in 2006.

Sprint said it remained “fully committed to developing WiMax services and deploying a WiMax network that will allow customers to realise the benefits of a mobile broadband internet experience”.

But the company added: “In light of this announcement, Sprint is reviewing its WiMax business plans and outlook and the company expects to comment further on these topics early next year.”

Sprint Nextel investors have become increasingly concerned about the carrier’s plans to spend $5bn by the end of 2010 to build a nationwide WiMax network at the same time as the company is struggling with its core mobile phone operations in the wake of the August 2005 acquisition of Nextel Communications.

If an incoming new chief executive at Sprint Nextel does decided to slow or cancel the carrier’s "Xohm” WiMax project – or spin it off as a separate business as some analysts have suggested – it could have far reaching implications for the US communications and media distribution sectors.

“While it’s clearly premature to interpret today’s news as a Sprint capitulation to shut down its WiMax venture, we believe that this is potentially a move in the right direction,” said Craig Moffett of Sanford Bernstein.

“If a WiMax shutdown does materialise, we would view it as a decidedly positive development for Sprint, as the company would then be able to focus on its core – and severely challenged – wireless business,” he said.

Such a decision could also affect US satellite TV operators which have signed agreements with Clearwire to use WiMax technology to enable them to offer a "triple play” bundle of video, voice and broadband data services.

Mr Moffett added, “The unwinding of the Sprint/Clearwire partnership opens the possibility of cable operators joining forces with Sprint and offering nationwide WiMax via a joint venture with Sprint, perhaps where Comcast would contribute the spectrum it acquired in the AWS [spectrum] auction last year – as their ‘answer’ to the wireless question.”

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