With Sprint Nextel and Clearwire suspending their planned WiMax partnership, doubts (once again) began to surface on Friday about the future of the next generation long range wireless technology.
For now, both Sprint Nextel and Clearwire maintain that the end of the relationship will not affect either company's build-out plans. In fact, neither company is ruling out working together again at some point in the future -- after some rejiggering of business models.
Avi Greengart, principal analyst for Current Analysis, expects it'll be one of "wait those wait and see sort of things." Indeed with WiMax, that seems to be par for the course.
In July, the two operators announced they would team up to provide WiMax network coverage to approximately 100 million people by the end of 2008. Under that agreement, Sprint and Clearwire would have shared costs on deployment and then jointly sold wireless broadband to businesses and consumers, as well as offer services to the U.S. government and public safety agencies.
In Sprint's case, the company says it will still spend about $5 billion on building out a WiMax network through 2010. That won't change, according to the company. But Clearwire, in a Q3 earnings statement released on Friday, seemed more cautious. The company says it currently has 348,000 subscribers in a total market of 14.8 million, which means its has a market penetration of 2.4 percent. By its own admission, Clearwire also says its "business plan will require [the company] to raise substantial additional financing both in the near term and over the next five years or more."
What's more, because the company is still dependent on commercial partners to develop and deliver the equipment for its existing and planned networks, the dissolved Sprint partnership could mean some difficult times ahead for the smaller provider. For now, though, the company says it's on track with its 2008 deployment plans. Interestingly, a story in the Wall Street Journal even speculates that the company could get various cash infusions from other big players in the WiMax arena -- such as Intel, Motorola or Samsung -- who now have a vested interest in the availability of WiMax networks next year.
Regardless, Clearwire seems committed to WiMax whether the ship is floating or sinking:
"We are committed to using commercially reasonable efforts to deploy wireless broadband networks based solely on mobile WiMax technology once that technology meets certain specified performance criteria, even if there are alternative technologies available in the future that are technologically superior or more cost effective.nce criteria," the company said in a Friday statement.
But Greengart also says that Friday's news points to future difficulties for an already floundering Sprint. "It's certainly not that surprising given the turmoil over at Sprint," Greengart says of the nixed partnership.
"Sprint has been under pressure from Wall Street to either postpone or make different use of the spectrum assets it has, or to provide a better examination for how quickly the WiMax endeavor can become profitable," he says. Indeed, Sprint and everyone else involved in the commercial prospects of the technology has had a difficult time doing this, especially given the number of variables involved in WiMax deployment.
In a sense, Greengart says "the whole [WiMax] network is kind of a field of dreams approach. Build it and they will come, is the idea."
And yet, no one seems to be sure what the consumer value proposition will be, or the killer app for that matter. In fact, this is largely the reason Sprint was going with such an open approach with Xohm, Greengart says, with no restrictions on applications or devices.
The fear has been that with all the focus on WiMax (or Xohm), however, that Sprint is taking its eyes off of its core business, Greengart says, and is now paying the price.
While it's possible the Sprint/Clearwire breakup is just a temporary glitch to WiMax's eventual commercial debut, Greengart ultimately says it will come down to whether the companies can convince Wall Street the technology a good idea given the substantial expense involved. And on that front, both companies are getting a good deal of help lately. Just ask Intel.
As a major investor and proponent of WiMax, the chipmaker has a different take on the Sprint/Clearwire announcement. While Intel says it's disappointed by the news, the company doesn't see the end of the partnership affecting WiMax roll out.
"From Intel 's perspective, it doesn't change our position on WiMax," says Kari Aakri, a spokesperson for the company. "It doesn’t change our plan on delivering silicon and platforms next year…and it doesn't change the fact that other manufacturers will be releasing WiMax products."
"I think people need to remember that WiMax has made quite a lot of progress on a number of fronts," Aakri added, citing the International Telecommunication Union's (ITU) announcement in October, which officially made WiMax 3-G network, and the fact that a number of big OEMs and PC makers are committed to releasing WiMax enabled products next year.
"This is going to take time to roll out on a national level," Aakri concludes. "It's not a matter of flipping a switch and everyone in the U.S. suddenly has WiMax."
On Friday, Clearwire reported that its third-quarter net loss increased to $329 million, or $2.01 a share, from $60 million a year earlier. This was attributed to a one-time charge of $159 million related to the refinancing of the company's senior debt during the quarter. Revenue, however, jumped to $41 million from $27 million.
Photo: HowStuffWorks.com
