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The Wall Street Journal reports that Sprint Nextel might bring in Google, Intel, Best Buy for Clearwire joint venture: Such a deal would make new Sprint CEO Dan Hesse’s job easier, reducing capital requirements through outside investors, reducing its demands on his time, and reducing the firm’s exposure.
The Wall Street Journal reports that Sprint Nextel said no to $5b and a return of Nextel’s CEO from SK Telecom, Providence Equity Partners: The investment would have been in the form of convertible securities at a 20 to 30 percent premium over Sprint’s current stock price, and would have carried the return of Tim Donohue, who had headed Nextel when it was acquired by Sprint, and was chairman until 2005. The combined firm is worth slightly more than Nextel’s value when acquired, but Sprint has also sold some assets, notably its landline division.
SK Telecom is working on its own WiMax network, with the compatible WiBro flavor deployed (but with few customers) in South Korea. It also has an interest in its former division SK Teletech (now SKY), which makes advanced CDMA handsets that would work on Sprint’s network.
Further, SK Telecom is now the majority partner in the joint venture with EarthLink called Helio, which brings those selfsame advanced handsets into the hands of American youth (primarily) as an MVNO (mobile virtual network operator) buying most or perhaps all its minutes and data transfer from…Sprint Nextel.
The Sprint board said no, and declined a face-to-face, even.
The Wall Street Journal reports the deal for a joint mobile WiMax network is off between Sprint Nextel, Clearwire: That doesn’t mean either company is abandoning plans, nor that the two won’t forge a new deal. But with the departure of Sprint’s head due to a lack of confidence in his initiatives, it’s hard to see how an interim CEO could sign off on something that might last for years or even decades.
The deal between the two firms was for them to use complementary spectrum holdings and carry out spectrum swaps to create nonoverlapping network buildouts that would cover the whole country. Sprint would also allow Clearwire to resell its 3G EVDO network, a critical stage in building a roaming business audience. The complementary buildout would prevent double building, and provide the full set of frequencies in each market needed to ensure the highest data rates.
The Journal reports that some of Clearwire’s partners—Intel, Motorola, and Samsung—might “try to inject financing into Clearwire” to keep the WiMax network buildout on track. Intel and Motorola previously put in hundreds of millions.
Wall Street Journal spells out that Sprint Nextel has put many options on the table for WiMax rollout, but canceling it appears unlikely: The takeaway here is that Sprint might merge with Clearwire through a spinoff that would form a separate public company, look for specific investment in the WiMax unit, purchase Clearwire—or just sign the darned contract with Clearwire for building a complementary network footprint. Sprint is trying to get its act together in preparation of the entrance of a new permanent CEO; they don’t want to stand still while they engage in a search.
Navini bought by Cisco for $330m: The deal puts late-entrant Cisco yet again into the fray of another wireless “revolution.” Cisco bought Airespace in 2005 to assume one of the top positions in the wireless LAN switch market. The Navini acquisition gives them worldwide customers of mobile WiMax technology before the big rollout here in the US by Sprint Nextel (we still assume) and Clearwire. Navini has a range of non-WiMax products, too, which work in popular frequency bands worldwide, and come with CPEs and PC Cards for end users.
It’s time to ask the question after the resignation this afternoon of Gary Forsee as chairman and CEO of Sprint Nextel: What becomes of WiMax? Sprint Nextel’s giant leap and giant spectrum holdings led to Intel, Motorola, and Samsung committing to technology previously only on the roadmap in the U.S. of startup Clearwire. Forsee certainly led the move into WiMax as Sprint’s 4G technology of choice. With his departure, prompted by shareholder complaints in the face of subscriber defections, lackluster revenue, and a long wait for a payoff of the current plans, will WiMax survive on the chopping block?
Sprint conceivably owns several billion dollars worth of 2.5 GHz licenses. I’m not sure how they’re valued in the current marketplace nor how freely transferrable most licenses are. Because Sprint acquired most of its licenses outside of the educational market, they may have substantially fewer constraints on transferring them.
The company is still coping with the ongoing liabilities associated with sorting out their scattered spectrum holdings that Nextel pledged to pull together to create contiguous ranges for public safety. That’s in disarray, with costs far higher than anticipated, and Sprint Nextel holding firm and delaying plans.
If Sprint focused on its partnership with cell companies, recommitted to the EVDO 3G to 4G roadmap, and sold its 2.5 GHz holdings, perhaps that would satisfy investors and put them back on the map as a competitor. But it’s hard for me to see the advantage. Who would buy the holdings? Another carrier, ostensibly. Clearwire has $1b in the bank, hardly enough to buy all of Sprint’s licenses. (Clearwire and Sprint are past the 90 days predicted to finalize their complementary network and roaming deal, too.)
The Wall St Journal reports that Sprint Nextel is looking at financing options for WiMax service: The company has committed $3b to the rollout, and may need to spinoff the WiMax unit and form a partnership with Clearwire. That would provide a massive amount of licensing power, and vastly reduce the competitive framework between the two operators. Sprint might also create a “more modest partnership” with Clearwire. Sprint might also look for outside financing, notably from MSOs (multiple system operators, or cable TV giants), with which they already have a relationship for reselling cellular service.
The article makes a few mistakes. While it notes that Clearwire currently uses a WiMax-like technology, the company’s path is for actual WiMax in 2008. That should have been noted, as it’s key in terms of integration between Sprint and Clearwire. Second, the chart showing a comparison of options between WiMax and 3G services has several problems. First, the bandwidth comparison doesn’t note that it’s downstream speeds only. Second, 3G networks using EVDO Rev. A, which is now extensively but not completely deployed by Verizon and Sprint, can reach 850 Kbps as a routine speed with peaks over 2 Mbps. The WiMax speed is noted as an absolute. Third, comparing 3G to DSL and WiMax to cable is absurd. DSL is routinely available at rates from 1.5 Mbps to 6 Mbps. Cable is typically only available at high starting points, but pricing is often in parity with similar DSL offerings.
Om Malik points out at GigaOm that the Sprint/Nextel merger may be the hidden cause of these plans, as the integration between the two firms has proven problematic. Nextel, however, had a large spectrum portfolio, and it was clear that was one of Sprint’s big motivations.
Om Malik argues that fixed wireless broadband provider Towerstream is riding Clearwire’s coattails: Towerstream has been providing fixed service for some time in major cities, but hasn’t had explosive success. They got into the over-the-counter stock market by buying an unrelated firm (University Girls Calendar Ltd.!), and then migrated into the NASDAQ. They’re looking to raise $40m, but at $4 a share—not yesterday’s close near $6 a share. Thus, a plunge. Revenues are quite low for such a long-established firm in mature cities.
Qualcomm has acquired the 802.16e portfolio from TeleCIS: Qualcomm says they wanted engineering resources (uh, people?), and would apply those resources towards a range of technology, including mobile WiMax if demand materializes.
Clearwire sells more stock than estimated at high end of range: The Craig McCaw firm brought in $600m by selling 24m shares; they trade under the ticker symbol CLWR. The firm raised the money to continue its very expensive rollout of pre- and soon actual-mobile WiMax service nationwide. Clearwire currently operates in 34 US markets and in Belgium and Ireland, and has 207,200 subscribers, mostly in the US. It raised $2b before the stock offering.
The FCC required AT&T to sell off 2.5 GHz spectrum as part of its acquisition of BellSouth: Clearwire gets the prize spectrum, which probably also brings it into a closer relationship with AT&T. The deal is for $300m in cash. The 2.5 GHz spectrum licenses and leases were owned by BellSouth across its nine-state territory. The Seattle Times reports that Clearwire will boost its spectrum holdings with this purchase by 14.2 percent, and revised its estimate of population covered to 214m, up from about 200m just a few weeks ago. Carol Ellison at MuniWireless.com reminds us that Clearwire founder Craig McCaw sold AT&T a pile of cellular spectrum in 1994 for $13b, making his first fortune.
The firm had a previous IPO filing, but withdrew it and accepted $900m from Intel, Motorola: The new IPO would sell 20m shares for $23 to $25 to raise capital for expansion, or over $500m at the mid-range after expenses. After the sale, Intel will keep a 27 percent stake and Motorola, 13 percent. Both firms, along with Samsung, are developing mobile WiMax equipment for Clearwire, as well as for Sprint.
BusinessWeek compares the ostensible 2007 IPOs of Clearwire and NextWave: The former has $1.2b in cash on hand, blue-chip investors, and a huge pile of spectrum; the latter, about $200m in cash, and a much more uneven portfolio of frequencies. Where Clearwire said in their SEC filing yesterday that they won’t currently deploy in any market where they don’t have 30 MHz (6 channels of 5 MHz each), NextWave has from 10 MHz to 40 MHz in their markets. Sprint claims 80 to 85 MHz per market. All three firms plan mobile WiMax launches in 2007.
A Sprint VP said that 60 MHz is minimum for broadband. It’s unclear whether Clearwire (and this BusinessWeek article) are counting the same way. Clearwire may mean 5 MHz for each of uplink and downlink directions for a total of 60 MHz, rather than 30 MHz, in the markets they intend to launch in.
BusinessWeek sees NextWave as more likely an acquisition that would place its portfolio and technology within a larger firm’s offering.
(Note that this is NextWave Wireless, a spinoff of the cell carrier that wound up making money by selling spectrum they never deployed on after protracted litigation with the FCC that wound up in the land’s ultimate court; the Supreme Court found in NextWave’s favor. NextNet, which is often confused with NextWave, was a Clearwire subsidiary that made proprietary wireless equipment, which is what Clearwire currently uses for its network. Clearwire sold NextNet to Motorola.)
Clearwire now passes 205m US, 117m European customers: In their revised filing today for an initial public offering of stock, the company reveals their current spectrum holding position. A month ago, they were coy, probably in anticipation of this filing. When I spoke to two heads of the firm for their Greater Seattle area, I asked if the 90m people passed figure was accurate, wondering about their competitive position relative to Sprint, which claims over 100m people (not households) will be offered their “4G” mobile WiMax service by the end of 2008. Co-CEO Ben Wolf said, “Spectrum footprint dramatically larger than what you referenced earlier,” meaning bigger than 90m people. (This comparison is tricky, because Sprint has discussed deployment footprint, not license holdings.)
On page 3 and 55 of the S1 filing, the company notes that they now own 11.5b MHz-POPs in the U.S. (2.5 GHz band) covering 205m people, and 5.1b MHz-POPs in Europe, covering 117m people. This excludes the recent German auction which adds coverage of 82.5m people, as the licenses were both large (21 MHz each for uplink and downlink) and national. (MHz-POPs are megahertz times population—spectrum bands in megahertz multiplied by local population.) They still have to complete deals that represent a portion of these holdings, they note.
The company also reveals some of their technical decisions on deployment on pages 55-56. They require at least six channels of 5 MHz each to launch service in an area. But they predict that mobile WiMax will provide ever increasing spectral efficiency—both as an evolution in the standard and over their current, proprietary, NextNet technology—resulting in launches that might involve fewer licenses. But they also note that “we could find that new technologies and subscriber usage patterns require us to have more spectrum available in our markets.”
Clearwire currently has deployed service to areas that comprise about 8.5m people in the U.S. and 1m in Europe. But they claim just 188,000 subscribers so far. [link via GigaOm]
As noted in earlier posts, Sprint and Clearwire own the best spectrum for mobile WiMax in the US: Having chosen, each of them, to deploy that technology, it’s quite unlikely that any other firm at present has the right combination of licenses to challenge them in other bands on a national scale. What is possible is that smaller licensed parties that are highly regional could leverage the equipment choices of Sprint and Clearwire that will turn WiMax into a much more highly commodified technology—coupled with Intel’s commitment to package WiMax adapters in future laptops—to deploy small networks.
I don’t know about smaller licenseholders in 2.5 GHz as a class, but there are enough licenses in bits and pieces that it’s possible a rural area might have a provider that opts for mobile WiMax in licensed 2.5 GHz as an alternative to broadband wireless (using current fixed WiMax technology). This is partly because there’s no certification profile yet and may never be a profile for using fixed WiMax in unlicensed spectrum, although there’s some interest in the 5.8 GHz band.
If 2.5 GHz mobile WiMax gear becomes cheap enough, then a small town without competitive Clearwire or Sprint service could find itself with a mobile WiMax provider, but the economics have to be awfully solid. Many of the arguments against Wi-Fi and broadband wireless stem from unlicensed spectrum. But the flaw with licensed spectrum is paying to buy or lease that license. The small town’s FCC licenses for 2.5 GHz might still be too expensive to purchase for a smaller firm even if larger companies aren’t offering service. Or a small firm might roll out service, only to see Clearwire or Sprint activate a network using licenses they hadn’t built out for yet.
Craig McCaw’s broadband wireless firm Clearwire raises $600m from Intel Capital, $300m from others: The latest revolutionary wireless firm founded by McCaw aims to deploy mobile broadband wireless worldwide using mobile WiMax (part of 802.16e-2005). Part of the money comes from Motorola purchasing Clearwire’s NextNet equipment subsidiary, which has been manufacturing and prototyping gear for Clearwire’s network, starting with customer premises equipment (CPE), or the fixed receivers plugged in at homes.
Clearwire owns the second-largest portfolio of spectrum in the desirable 2.5 GHz band in the U.S.; Sprint Nextel is the biggest holder. This is a great band into which to deploy mobile WiMax because of the geographic coverage—Clearwire says that they can reach 90m residents with current licenses—and the channelization, which is wide enough to allow sufficient bandwidth for real mobile applications, including video. (While BellSouth owns a chunk in 2.5 GHz, their biggest holdings are in 2.3 GHz. They are already looking at equipment that would offer WiMax or WiMax-like services in both bands. This spectrum is part of AT&T-formerly-SBC’s desire to purchase BellSouth, which would also give AT&T 100-percent ownership of Cingular, and allow more combined offerings there across DSL, cell data/3G, and WiMax.)
Intel has had a chicken-and-egg problem with its backing of WiMax, particularly the mobile and portable/nomadic form, in that they need networks to drive interest in the chips they plan to include in their laptop reference designs. By investing this heavily in Clearwire, they’ve basically guaranteed that a network will be built. This also seeds more interest in competing networks, and puts the cellular operators on notice that Intel is not their partner, if they ever harbored such a suspicion. In fact, Clearwire could offer competitive voice services over their network using handsets with mobile WiMax built in.
Intel is slated to ship Rosedale 2 chips by the end of the year, according to Light Reading, which will offer both older fixed (802.16-2004) and newer fixed/portable/mobile (802.16-2005) support. They’ll also make Ofer-R available for Wi-Fi and WiMax support in portable and handheld devices.
Way back at the Centrino introduction, Intel told me that future Centrino wireless chipsets would incorporate Wi-Fi and cellular data standards. That never happened. Instead, Intel discovered the wonders of a newly competitive marketplace that they thought could evolve worldwide in which they could have a stake and a say in its operation and standards development. Intel has been a big force in WiMax from many angles, this being just the latest.
Clearwire gives up its numbers in exchange for market dollars: The latest Craig McCaw-led company likely to become a billion-dollar operation is Clearwire, a provide of broadband wireless using equipment from its acquired subsidiary NextNet Wireless. The company has received over $1b in financing over several years, resulting in deployment in 27 markets in the US, plus Belgium and Ireland. Their IPO filing shows 88,000 US subscribers and 11,500 in Belgium and Ireland. It lost $140m on revenues of $33.5m last year, but might need to spend billions to provide national service.
Clearwire owns the second largest position in the 2.5 GHz BRS band; Sprint Nextel was number one, and remember who turned Nextel into a powerhouse, partly because of clever spectrum acquisition and usage? Om Malik notes that Sprint Nextel and Clearwire have been swapping licenses to produce better national coverage for each. The Seattle Times notes that the IPO filing says Clearwire could “pass” 90m users based on its spectrum holdings.
Read their Form S-1 for all the details.
Qualcomm has signed with Soma the first licensing deal for its portfolio of what it claims are patents covering WiMax technology: My good friend and colleague Nancy Gohring writes for IDG News Service that Qualcomm acquired these patents as part of its purchase of Flarion Technologies. Flarion has pursued broadband wireless via a standard developing in 802.20 (mobile broadband wireless access), while WiMax emerged out of the 802.16 working group (broadband wireless access). Mobility was inserted into WiMax via 802.16e (now 802.16-2005), which covers fixed, nomadic/portable, and mobile broadband.
Qualcomm wouldn’t comment for the story, but analysts expect this unnecessary public announcement was a shot across the bow to signal their intent. Alvarion says in this report that they and other industry leaders believe Qualcomm’s patents aren’t relevant to WiMax.
ZDNet reports that Intel released a slew of money around the world for WiMax development: This includes a $1.12 billion contract for a project in Taiwan, which will agree to provide the necessary spectrum for the work. The project will be government-assisted until 2008 to bring businesses into the fold.
The article says Intel has 13 more Europe and Americas networks up and running, with 10 more they’ve sponsored due to appear by year’s end. This includes projects in The Dominican Republic and Austria.
Andrew Viterbi suggested that broadband wireless has a smaller potential market than estimated: He co-founded Qualcomm, and doesn’t believe the applications merit bandwidth beyond what’s currently be rolled out. The prices would make it prohibitive. It’s unclear from the reportage whether he was speaking generally or just about mobile broadband, although the latter seems likely.
Alvarion issued a press release about their 10,000 BreezeMax Pro subscriber unit orders: They’ve shipped 5,000 of these already to 30 customers. These early units employ Intel’s 802.16-2004 chipset which can’t yet be called WiMax certified. Numbers from anyone else?
Forward Concepts report indicates massive growth: With WiMax viewed in their report as complementary to Wi-Fi and cellular, not a full replacement for either, carriers and other will use WiMax as a major component in deployment. One comment I’ve heard often is that cellular carriers in the U.S. are likely to follow their European counterparts and use more wireless backhaul among cellular towers instead of wired.
The Seattle Times reports that Clearwire has raised $260 million in a debt offering: That figure could double based on an investors’ option. That’s a decent chunk of change to be used for growing its coverage area.