Sprint Nextel Corp is combining its planned high-speed wireless network with Clearwire Corp, creating a venture with funding from technology and cable companies.
Intel Corp, Comcast Corp, Time Warner Cable Inc, Google Inc and Bright House Networks will invest $3.2 billion in the new company, Sprint and Clearwire said yesterday in a Business Wire statement. The network uses a technology called WiMax.
The agreement lets Sprint scale back spending after an exodus of mobile-phone customers hurt profit last year. It also builds support for WiMax, which can blanket whole cities with network coverage. The technology may help Sprint compete with larger rivals AT&T Inc and Verizon Wireless by providing faster Internet access.
"This could remove a potential distraction" for Sprint, Michael Nelson, an analyst at Stanford Group Co in New York, said before the announcement. "They need to increase their focus on fixing their core business."
The investment from the cable and technology companies will be based on a target price of $20 a share for Clearwire's stock, according to the statement. The price will be adjusted based on the average price of Clearwire's new shares on 15 randomly chosen days after the deal closes. The price will be subject to a cap of $23 a share and a floor of $17.
Trilogy Equity Partners, the investment firm co-founded by John Stanton, the former Western Wireless Corp chief executive officer, will invest in the new Clearwire common stock. Sprint will own about 51 percent of the new company, while existing Clearwire shareholders will have about 27 percent and the investors as a group will hold about 22 percent.
Sprint enlisted big technology companies such as Google and Intel to take on AT&T and Verizon, the two largest US mobile-phone companies. Sprint is the only one of the three carriers to commit to the WiMax technology, which risks limiting the standard to a smaller pool of users. The company lost more than 1 million mobile-phone contract customers in 2007.
"In terms of economies of scale for WiMax, Sprint's deal is the biggest deal out there," Yankee Group analyst Phil Marshall said in an interview from Boston. "The WiMax industry is holding out very high hopes for the Sprint network to be successful."
WiMax offers wider coverage than today's wireless-fidelity, or Wi-Fi, systems, which deliver Internet access to smaller areas such as buildings and parks. While AT&T and Verizon are backing a rival technology called Long Term Evolution, they say it may not be ready for at least two years.
Clearwire and Sprint had scrapped a WiMax alliance in November after agreeing in July to team up. The new accord may bolster Clearwire, which has yet to turn a profit and posted a $727.5 million net loss last year.
Source:China Daily/Agencies
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