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Sprint: Rethinking WiMAX?

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Sprint, which broke away from the cellular camp, and bet big on WiMAX as its technology of choice for high-speed wireless connectivity, is apparently rethinking its strategy, mostly under pressure from activist shareholders, who believe that the company is spending too much money on an unproven technology. According to The Wall Street Journal, the third largest mobile operator is mulling one or more of these options:

  1. Form a joint venture or a partnership with Craig McCaw’s Clearwire.
  2. Maybe spin-off the WiMAX business.
  3. Attract outside partners like cable companies to co-invest in the WiMAX buildout. Time Warner Cable has had informal talks with the mobile operator, its partner in a four-play offering Pivot.

One potential sticking point is that cable providers want a guarantee that they would be able to lease access to the WiMax network at low cost to offer future broadband services, people familiar with the matter say. [WSJ]

Still, this proposal makes most sense when compared to the Clearwire option. Sprint, which plans to spend $3 billion or so on the WiMAX network has been hammered on the stock markets, though the stock price declines have nothing to do with WiMAX. Instead, Sprint’s misfortunes are directly correlated with massive churn in its cellular customer base. Sprint Nextel’s postpaid gross additions fell 12% in the first quarter, and revenue grew a meagre 5% – leaving investors disatisfied.

The integration problems between Sprint and Nextel – cheered by the genius Wall Street investors at the time news was announced – are the real reason Sprint finds itself between a rock-and-a-hard-place. While WiMAX bet might seem crazy today, it may seem like a minor investment and could dramatically change the future of mobile communications.

As an aside, the last time telecom CEOs paid too much attention to Wall Street, they ended up either in jail (for the right reasons) or out of a job. Michael Armstrong, former AT&T CEO had the right four-play idea, except he kept CNBC tuned-in for too long.

9 Responses to “Sprint: Rethinking WiMAX?”

  1. When shopping for broadband, most people choose DSL or cable. But a third alternative is coming. In a normal cell radius deployment of three to ten kilometers, WiMAX systems could deliver up to 40 Mbps per channel, enough bandwidth to simultaneously support hundreds of businesses with T-1 speed connectivity and thousands of residences with DSL speed connectivity.

  2. WiMAX is a smart move – lots more cost effective. With Motorola and Intel, there is enough muscle to crush other carriers.

    When you are outgunned, you can’t beat the competition by following their footsteps.

    Screw the analysts — when does pontification run business?

  3. for all you none believers of the wimax, its now time to officially bury the myth. Here is a testimonial of ( who had actually tested and proven the wimax system in less than favourable weather conditions(Hurricane Dean with 158 mph gust of winds)and flying debris.

  4. Next EVDO revs are not anywhere near on par with WiMax. Sprint should stick to its guns and get back to being a technology leader or perish like MCI and AT&T

  5. Grant Ho

    Agree that Sprint’s placing far too big a bet on an unproven technology… for $3B in capex, I’m not sure I’d invest in something which has yet to generate scale economies or a proven business model, where CPEs are still expensive and few, and which has major market lag time compared to 3G. After all, aren’t the next revs of EVDO supposed to be on par with WiMAX?

  6. Noga Rosenthal

    WiMax is unproven technology because no one has tried to prove it yet. Only once it’s tried on a grand scale will we ever know if it works.

    • Noga Rosenthal