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Sprint and Clearwire Dissolve WIMAX Partnership Plan| November 12, 2007 | Wireless | Competitive Intelligence Report
Event Summary On November 9th Sprint and Clearwire mutually agreed to terminate the letter of intent (LOI) signed in July 2007. The two companies could not resolve complexities associated with the LOI and failed to reach final agreement on the terms of the transaction. 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. Analytical Summary Current Perspective: Slightly negative on Sprint and Clearwire’s dissolution of their letter of intent from July for a planned partnership in which the carriers would exchange spectrum, build out their respective markets to enable a nearly nationwide network, enable roaming, and share in product and service evolution, infrastructure, branding, marketing and distribution initiatives. The news casts serious doubts about Sprint’s commitment to WiMAX, (or at least its ability to execute its plans), regardless of how the carrier positions it. Vendor Importance: Very high to both Sprint and Clearwire, because each was banking on the alliance to help them build out key markets, collaboratively shoulder the burden of capital expenditures and marketing, and rapidly realize nearly nationwide WiMAX coverage. This in turn would provide them with the ability to expand services and revenues, and give them a jump on competitive “4G” initiatives. While the partnership provided Clearwire with footprint expansion and credibility, important for a company that had just gone public, it was also extremely important to boost Sprint’s position at a time when the carrier was battling problems on so many fronts, especially erosion from the legacy Nextel customer base, and mediocre growth and financial performance overall. Market Impact: Low in the near term on the consumer wireless service segment, because other carriers already have plans in place for network upgrades and services that will compete with WiMAX. If Sprint’s projected milestones for deployment of key WiMAX markets end up derailed as a result of the dissolution of the partnership, however, competitors will reap the benefit. Recommended Competitor Actions • Wireless competitors should suggest that this news is another indicator of an unstable company. In addition, the upgrade plans for EVDO and UMTS/HSDPA are well beyond the planning stages for major U.S. operators, and will serve the needs of most businesses for the majority of mobile applications anticipated for the next several years. As Sprint has not outlined its pricing, competitors should note that it is not guaranteed that XOHM would be priced below current 3G options in spite of its supposed bandwidth optimization and the economies of scale that come with a large ecosystem of vendor partners. • Providers of wireline leased line or broadband wireline business services can add the instability of Sprint’s WIMAX strategy as evidenced by the dissolution of the Clearwire partnership to their other arguments regarding the limits of WIMAX technology, speeds and applications. They have already characterized WiMAX technology as being obsolete before it is even rolled out and slow compared to the current generation of 6 Mbps+ of cable, Verizon FiOS and ADSL2+.
Perspective Competitive Positives and Concerns Recommended Vendor Actions | Client access - Wireless Services - U.S. | More information
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