Sprint (s s) will pay Clearwire $1 billion over the next two years in a deal that effectively ends the wholesale 4G agreement dispute between the two companies. The deal removes some uncertainty for struggling Clearwire and helps forge a stronger bond with Sprint, its majority owner, who has reportedly been looking at striking an agreement with spectrum holder LightSquared.
But also noteworthy is Clearwire and Sprint make no mention of WiMAX, the 4G technology employed by Clearwire, which leaves open a lot of questions about what 4G technology the two will rely on going forward. Sprint has been testing the more common, alternative 4G technology known as Long Term Evolution, and is reportedly working toward a migration to the technology, something that has been made easier by its network overhaul, which will swap in new multi-modal base stations that can easily support LTE equipment. Today, the Wall Street Journal (s nws) reported Sprint is in advanced talks with Clearwire and LightSquared about using Sprint’s infrastructure in a deal that would allow LightSquared to roll out its 4G LTE network while paying Sprint through cash and spectrum use.
Sprint could have used those talks with LightSquared to secure favorable wholesale agreement terms with Clearwire. Or it could have also used the negotiations to help push Clearwire into embracing LTE, a possible precursor to an outright acquisition by Sprint. Or perhaps, it’s part of a larger plan to combine Sprint, Clearwire and LightSquared into one larger competitor that can go up against the likes of AT&T (s t)/T-Mobile and Verizon Wireless (s vz). With the infrastructure-sharing agreement brewing with Sprint, Clearwire and LightSquared, it sounds like Sprint isn’t backing away from LightSquared even as it secures a wholesale agreement with Clearwire. The question is: How does Sprint want to proceed with its obvious LTE plans?
We’ll have to see what the larger implications are of this wholesale agreement. For now, it means Clearwire is still in good standing with Sprint and has some more money to keep its WiMAX network going. The deal establishes new wholesale pricing terms and provides Clearwire with “minimum usage commitments of $300 million in 2011, $550 million in 2012 and $175 million in pre-payments for 4G wholesale services to be used in 2011, 2012 and beyond.” The CEOs of the two companies emphasized the deal will extend their relationship as they collaborate on 4G services.
“Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago,” said John Stanton, Clearwire’s interim CEO. “Today’s agreement further aligns Sprint and Clearwire’s interests and lays the foundation for a continued, constructive relationship. We are pleased to have the resources and partnerships necessary to maintain our 4G leadership and leverage our significant spectrum and capacity for delivering mobile broadband services.”
The deal also includes agreements regarding wholesale pricing for Sprint devices that ride on Clearwire’s network and also includes usage-based pricing and volume discounts as well as minimum payments per 4G device. We’ve asked Sprint and Clearwire for details on the usage-based pricing component, but haven’t heard back yet. Today, both Sprint and Clearwire offer unlimited 4G service packages.
It may not be that much of a coincidence that Sprint and Clearwire finally resolved their wholesale agreement not long after Clearwire reorganized its executive staff, replacing CEO Bill Morrow with chairman John Stanton. The change was likely made to help shakes things up at Clearwire and probably get this agreement going. Plus, with ATT’s proposal to buy T-Mobile, Sprint has to get its act together before the industry consolidates and squeezes it out.
Now, we’ll have to see if Stanton is ready to make some more moves to line up Clearwire’s interests with Sprint. Striking a wholesale agreement is a good first step, but going all-in on LTE would help clear up uncertainty about both of their future 4G plans. Or we could see a merger with Sprint, which has always been a possibility and may become more of a necessity in light of the proposed AT&T and T-Mobile deal.