If Sprint Bails on WiMAX, What Happens to Clearwire?

Sprint CEO Dan Hesse

Sprint CEO Dan Hesse

A Sprint executive was quoted Tuesday saying that the nation’s No. 3 carrier is evaluating a switch to a Long Term Evolution network in the coming months, perhaps transitioning from WiMAX as its fourth-generation wireless technology. But if Sprint dumps WiMAX, what happens to its partner in 4G crime, Clearwire?

Sprint’s Senior VP of Networks, Bob Azzi, was quoted by FierceWireless as saying the carrier would study the rate at which its customers migrate from its 3G network to WiMAX over the next four to six months, and based on its spectrum, it would then evaluate a possible switch to LTE. This makes sense, as analysts I’ve spoken with assume Sprint will announce some time in the third quarter that it has chosen to use LTE since WiMAX as a technology can’t really compete on the speeds offered on the upload side, nor does it have enough support from operators — and thus from equipment makers — to evolve further.

We’ve known for some time that Sprint has tried out LTE equipment from various vendors, and that switching from its current gear to LTE involves a card swap as opposed to reconfiguring all the gear at the base stations or its tower network. A Sprint spokesman said today that its LTE decision would have to come from Clearwire, in which Sprint holds a majority stake. Sprint resells Clearwire’s WiMAX network under its own brand. But as large WiMAX operators such as Russian’s Yota or Japan’s KDDI have switched from WiMAX to LTE networks, the universe of possible WiMAX-gear-buying customers has shrunk. Clearwire, with its 1.7 million subscribers, is the largest WiMAX network around, and it’s floundering. That lack of operators deploying the technology makes it unlikely that telecommunications equipment makers will invest in next generation WiMAX technologies, making it a dead end as a network standard.

So Sprint’s hinting at LTE only makes sense, even if it did invest billions in driving WiMAX forward through investments in Clearwire and as recently as October insisted WiMAX was its strategy. I mean, if Intel can give up on WiMAX after its investments, Sprint, which has a business to run on top of a 4G network, can’t afford to keep dreaming. This throws the fate of Clearwire up in the air, as the operator has spent billions building out a WiMAX network and has struggled to add customers before its debt payments come due. Recently it halted its retail sales strategy and laid off workers. This caused Wall Street to speculate that Clearwire was giving in to Sprint demands, which could lead to more investment.

While Sprint is a logical buyer of Clearwire’s assets, it’s in somewhat of a Catch-22. If Clearwire fails, Sprint could see its bonds go into default, but if it buys Clearwire, BTIG analyst Walter Piecyk said in November Sprint may also risk default. Meanwhile Clearwire has a lot of spectrum, and has trialed LTE networks on some of it, but analysts are uncertain if Clearwire has the cash to make a switchover to LTE. Which means Sprint’s evaluation period may be a way of seeing what happens to its partner and buying time to make a decision. Right now the statements of Azzi and the statements from Sprint’s spokesperson aren’t in line. Clearwire doesn’t have the power here, and neither does Sprint.

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