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Sprint, Clearwire form $14.5B WiMAX venture

Tech, cable companies invest combined $3.2 billion in new venture

By Brad Reed, Network World
May 07, 2008 08:30 AM ET

Network World - After months of speculation, Sprint and Clearwire today announced that they are combining their WiMAX businesses to create a new $14.5 billion mobile broadband company.

As expected, the new company will be focused primarily on deploying a nationwide WiMAX network that will provide 4G coverage in both rural and urban markets. The new company, which will be known as Clearwire, will also concentrate on delivering wireless broadband to consumers, businesses and even government public safety services, Sprint says.

In addition to forming their new joint WiMAX venture, the two companies also announced that they had secured $3.2 billion in total investments from several major tech and communications companies, including Google, Intel, Comcast, Time-Warner Cable and Bright House Networks. Under the strategic investment agreement signed by the companies, Sprint will own the largest stake in the new company at 51%, Clearwire will own about 27% of the company, and the group of five major investors will own 22%. (Read Craig Mathias' analysis of the deal.)

After the deal is finalized, Comcast, Time Warner and Bright House will enter into wholesale agreements to become official vendors of Clearwire's 4G WiMAX services. Additionally, the three television companies will become bundled providers of Sprint's 3G wireless voice services, which Sprint hopes will expand the reach of its network to millions of new customers.

Google, meanwhile, has agreed to develop new Internet services, advertising services and applications for all Clearwire WiMAX devices. In return, Clearwire will support Google's open source Android operating system on all of its WiMAX devices. And finally, Intel has agreed to work with manufacturers to install WiMAX chipsets into Intel-based laptops and mobile devices, and also to market Clearwire's WiMAX service in congruence with Intel's performance notebook PC brand. While both Intel and Google have options to enter into 3G and 4G wholesale agreements with Clearwire, Sprint says that both companies have chosen not to do so at this time.

Sprint and Clearwire had previously signed a letter of intent to jointly build out a nationwide WiMAX network last summer, but then called off their plans months later, as the companies said they "could not resolve complexities" involved in the original plan. Former interim CEO Paul Saleh told an investor's conference last year that the original plans with Clearwire fell apart because having a WiMAX network split between the two companies had simply become too complicated, and the companies were worried that it might confuse customers.

Since then, both Sprint and Clearwire have been rumored to be negotiating a new deal to build out a nationwide WiMAX network with help from outside investors. Intel and Clearwire have a history of working together on WiMAX-related projects, and Intel announced earlier this year that it would integrate WiMAX into its new Montevina mobile platform.

The major investment by Time Warner, Bright House and Comcast in WiMAX wireless Internet technology further raises the stakes in the cable companies' rivalry with telecom carriers Verizon and AT&T, which have each been aggressively promoting their FiOS and U-Verse services as alternatives to traditional cable television and Internet. A report issued earlier this year by researchers Information Gatekeepers projects that telcos will be able to match the total number of high-speed accesses offered by cable companies by 2011.

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