The WiMAX buildout took somewhat of a setback today, when Sprint Nextel (S) and Clearwire (CLWR) decide to not pursue their plans for joint development of a nationwide WiMAX network. The Wall Street Journal reports that the reasons for dropping the plan are “the complexities of the transaction and the departure last month of (Sprint CEO) Gary Forsee.”
The two companies were hoping to develop a network with extensive roaming agreements. Wall Street had initially welcomed the idea, but when Sprint hit the skids, investors started wondering if the two companies should merge their WiMAX operations and spin it off as a separate company. Maybe this opens up avenues for a separate company all together.
However, for now the deployment of WiMAX in the US faces some challenges. Two rival nationwide WiMAX networks are going to be cost a lot, and add financial strain to both the companies. This development is not such good news for WiMAX backers such as Motorola (MOT) and Intel (INTC). In sharp contrast to the US, WiMAX is gathering momentum in overseas, especially in emerging economies.
No way Sprint and Clearwire are going to build rival networks. They’re just going back to the old plan of “let’s call it a coincidence that we never seem to buildout the same markets.” Then, when the numbers look more attractive/mood changes on Wall Street, the hookup will be back on. We’ve seen this plenty of times before in telecom. 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? The end game being, of course, that Sprint eventually buys back the whole enchilada at a nice profit to McCaw and friends.