Sprint, Clearwire, and Strategic Investors End WiMAX Speculation with Funding and a New Structure

| May 9, 2008 | U.S. Wireless Services | Competitive Intelligence Repprt

| Analysts: Bill Ho, Kitty Weldon, Brian Washburn

Current Perspective: Positive
Vendor Importance: Very High
Market Impact: Moderate/High

Event Summary

On May 7th Clearwire and Sprint Nextel announced plans to combine their WiMAX operations to form a new wireless communications company under the Clearwire name. Comcast, Time Warner Cable, Bright House Networks, Google and Intel are additionally investing $3.2 billion in the company. Sprint will own an estimated 51% of the company, Clearwire about 27% and strategic investors will hold about a 22% stake. The investors will have access to 3G MVNO agreements via Sprint and 4G MVNO agreements with the new Clearwire. The transaction is forecast to close in Q4 2008.

Analytical Summary

• Current Perspective: Positive on Sprint’s move to create an independent national WiMAX service provider with Clearwire and deep-pocketed strategic investors, because the new Clearwire structure answers anticipated questions of whether its WiMAX-based Xohm service bet would live or die. Furthermore, it alleviates some financial pressure that the carrier was feeling by going at the WiMAX effort alone and shouldering all the cost with the necessary funding to deliver a respectable footprint of 140 million POPs by the end of 2010. Finally, it reprises what seemed to be a dead partnership with Clearwire in order to bring about a near national service offering. While the foundation has been laid to bring WiMAX-based broadband services to reality, the new Clearwire needs to execute on a very aggressive and ambitious build-out plan to deliver on the promise of being two to three years ahead of competitors using 700 MHz spectrum and LTE technology. With the WiMAX chapter somewhat closed, Sprint can focus more attention and resources on its existing core wireless business and right other parts of the ship.

• Vendor Importance: Very high to Sprint, because the carrier has undergone so much turmoil in the last two years, including subscriber defections/market share, loss of leadership, re-banding, litigation, and pressure on the disposition of its WiMAX efforts. Industry observers and the financial community had been skeptical and even outright against the carrier's WiMAX direction, believing that it was too risky of a bet on such a huge investment. This new announcement negates somewhat the string of bad news, including the loss of the Qwest MVNO relationship to Verizon Wireless, the dissolution of Pivot services through joint-venture cable partners, and some possibly bad earnings metrics. With this Clearwire agreement, Sprint signals the cable venture partnership is still intact and it believes in WiMAX. This was punctuated by the large investment from Comcast, Time Warner, and Advance Newhouse (though without Cox). Moreover, Sprint will regain some service revenue momentum, as it forged 3G MVNO arrangements with these same cable partners.

• Market Impact: Moderate to high on the wireless service segment, because now 4G WiMAX is a reality under a unified brand with formidable financial backing from the likes of Sprint cable partners, Intel, and Google. With Sprint delivering 15 million POPs covered by the end of 2008 and promising 120-140 million POPs by year-end 2010, higher-data throughput service may become a reality and provide differentiation against competitors’ 3G data offerings.

Recommended End User / Customer Actions

• The creation of the new Clearwire is not expected to close until Q4 2008. Sprint has deployed WiMAX in a few initial metro areas but does not list customer plans yet; the existing Clearwire already offers services in select metros nationwide, and offers rudimentary business plans that primarily act as broadband replacement.

• The existing WiMAX services from Clearwire do not yet have business services sophistication equivalent to the Cisco 3G HWIC WWAN devices used by some providers as a dynamic failover and augment to wireline business services. Businesses should stay tuned for more bandwidth and greater functionality if the deal to form the new Clearwire closes as planned.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

Recommended Competitor Actions

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