Sprint has struck a $2.2 billion to take complete control of Clearwire. The deal isn’t final — Clearwire’s shareholders still need to vote and many of them aren’t happy with the perceived stinginess of Sprint’s offer. But if Sprint can push this deal through it will have closed the book on an epic saga.
The fates of the two companies have been intertwined since Sprint merged its WiMAX operations and spectrum with Clearwire in 2008, but their relationship goes back further and is built on much more than just a business arrangement. Clearwire and Sprint had starry-eyed visions of creating a new kind of mobile network and carrier.
2006: the year 4G became a thing
On August 8, 2006, then-Sprint CEO Gary Forsee announced that Sprint would adopt a little known technology called Mobile WiMAX for its fourth-generation mobile data network. 4G was a new — and many would argue a much misused — term at the time, but as Sprint’s plans began to unfold it became very apparent it was viewing WiMAX not just as a generational shift in technology but as new model for operators to sell mobile data services.
Led by then CTO Barry West, who would become WiMAX’s chief evangelist, Sprint proposed selling a pure mobile IP connection, following the model of an ISP, and letting any device makers or any application developer ride over that connection.
The choice of WiMAX as the delivery mechanism was also significant since it came out of the Institute of Electrical and Electronics Engineers (IEEE), rather than the wireless industry’s traditional standards bodies. WiMAX’s big backers came from tech — Intel and Google — not from telecom, and they wanted the future mobile Internet to be built on internet principles, not carrier ones.
Meanwhile, a wireless ISP owned by mobile industry pioneer Craig McCaw was getting similar notions. Clearwire was using fixed wireless technologies to deliver residential broadband service in smaller cities all over the country. In WiMAX, Clearwire saw a way to transform the an ISP into a mobile broadband carrier. It also happened to have built up a big collection of licenses in the same 2.5 GHz band over which Sprint was planning to deploy its network. It was only a matter of time before these two got together.
One big missed opportunity
Both operators danced around one another for two years, neither committing to a large-scale WiMAX deployment while they negotiated their eventual merger pact. Incoming CEO Dan Hesse inherited a financially strapped Sprint still reeling from its acquisition with Nextel. As he acknowledged in an in-depth interview with GigaOM this week, Hesse had two choices: either strike a deal with Clearwire or mothball WiMAX completely.
In May of 2008, the companies negotiated deal that combined both their WiMAX operations under the Clearwire umbrella and brought in a $3.2 billion investment from Intel, Google and several cable companies. The deal closed in December of 2008 at which point the combined Clearwire only had two WiMAX markets to its name: Baltimore and Portland, Ore.
Supposedly WiMAX had one other big advantage: it was well ahead of competing 4G technologies in development. Sprint and Clearwire felt they had years before their competitors could get LTE networks off the ground, and they were right. The first LTE network wouldn’t launch in the U.S. until 2010. Both companies essentially had a four-year head start, but they squandered their time-to-market advantage.
Clearwire rolled its network slowly in 2009, but in 2010 it made a big push, going live in some of the countries biggest cities. But after it brought San Francisco online on Dec. 28, 2010, its expansion ground to halt with only about one-third of the U.S. population covered. It just ran out of money.
Sprint’s first WiMAX phone, the HTC EVO 4G, went on sale in the summer of 2010. A few months later MetroPCS launched the first U.S. LTE network and phone. And that December, Verizon began its juggernaut rollout of LTE nationwide. Verizon’s first LTE phone, the HTC Thunderbolt went on sale in March of 2011. Sprint’s four-year head start had been whittled down to nine months.
The waiting game
Clearwire has basically been a holding pattern for the last two years. It’s announced all kinds of grand plans, such as its intent to build a new LTE networks alongside of WiMAX, but without funds it hasn’t been able to execute. Sprint has kept Clearwire afloat and has even fronted the initial funds needed to begin a limited LTE rollout. But until today’s big acquisition announcement, Sprint has been keeping Clearwire at arm’s length.
The global WiMAX ecosystem has pretty much collapsed, leaving Clearwire with one big asset: the single largest swath of 4G spectrum in the U.S. Sprint now has money thanks to its newfound benefactor Softbank, and given Clearwire’s hobbled state Sprint can buy the company at a bargain price. After four years, Sprint probably feels its time to take that spectrum back – or at least prevent anyone else from getting their hands on it – and resume its grand 4G project once again, this time with LTE.
Featured photo courtesy of Shutterstock user Yuri Arcurs