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 It's official: Sprint Nextel (S) will roll its next-generation wireless network, which uses a technology called WiMax, into Clearwire (CLWR), in a $14.5 billion deal. The company hopes to build out a network that would reach 120-140 million people by the end of 2010. Sprint's initial WiMax plans, announced almost two years ago, were to reach 100 million people by the end of this year.
Follow-up: "Is Sprint-Clearwire Doomed From The Start?"
Sprint and Clearwire hosted a conference call. No big news; see live notes below.
Sprint will have 51% equity ownership of the new company, Clearwire's existing shareholders will own 27%, and a host of investors from the cable and technology industries will own about 22% of the company. These include:
- Comcast (CMCSA), which will invest $1.05 billion
- Intel Capital (INTC), which will invest $1 billion
- Time Warner Cable (TWC), which will invest $550 million
- Google (GOOG), which will invest $500 million
- Bright House Networks, which will invest $100 million
What will the partners do? From the release:
- Intel will push manufacturers to embed WiMax chips in their devices and will market the service.
- Google will develop Internet and advertising services, and apps for WiMax devices. It will also help develop an "open Internet business protocol for mobile broadband services." Clearwire will support Google's Android operating system, which could eventually make Google more ad money. And, of course, Google will provide search and other apps.
- The cable companies will get wholesale agreements to resell wireless voice/Internet service under their own brands. They will also get wholesale agreements to re-sell Sprint Nextel's existing wireless voice and data services. This replaces a (similar) failed project called Pivot.
- Google becomes default search partner for Sprint, which will also pre-load Google apps like Maps, YouTube, etc. on some of its phones.
- Google and Intel have options to become Clearwire resellers -- Internet service providers -- but have "no current plans to do so."
- Sprint will give Clearwire access to its towers and fiber-optic backbone, and will get to share some of the costs with Clearwire.
The new company's board will have 13 initial members, including seven to be named by Sprint, four named by the strategic investors, one named by Eagle River, Chairman Craig McCaw's investment firm, and one independent member. McCaw is expected to remain chairman. Other expected directors: Sprint CEO Dan Hesse, Comcast CEO Brian Roberts, Time Warner Cable CEO Glenn Britt, and wireless industry vet/Trilogy Equity Partners CEO John Stanton.
Clearwire CEO Benjamin G. Wolff will keep his title. Sprint Nextel CTO Barry West will become Clearwire's President.
LIVE notes from the call:
- Sprint CEO Dan Hesse: Clearwire will have the largest spectrum position of any wireless carrier in the U.S.
- Hesse going over notes from release. Ben and Barry "should be selling ice cream" (paraphrase)
- Google will invest directly in the company. Not part of LLC.
- Clearwire will be able to re-sell Sprint's 3G, and Sprint will be able to re-sell Clearwire. Interesting.
- Potential uses: Download full-length movies over wireless. Etc.
- Mobile WiMax express cards, PC cards, embedded chipsets later this year. Consumer electronics devices "of all shapes and sizes" next year.
- Q&A begins.
- How different from Pivot? An MVNO arrangement that will allow cable partners to use their own brand and provide flexibility w/ their own apps, etc.
- Will be working closely with Google, featuring Android.
- Does this preclude other Sprint M&A during approval process? 4G plan for Sprint... WiMax could be the next step, but you go from 100% owner economics to 51%? Will Sprint need its own 4G plan like LTE? Hesse not aware of any conflicts. WiMax provides "lift" to 3G. Expect to provide multi-mode devices that can access WiMax and Sprint 3G. Because of being an early investor, we think economics to Sprint will be very favorable. Can bring 4G to market without capex investment.
- How plan to distribute? WiMax only or dual-mode CDMA/WiMax? Single-mode and dual-mode devices, including computing and handheld. Two networks will work together.
- Sprint will use equity accounting method, which means it will not be consolidated into Sprint reports.
- Sprint expects to have 15 million POPs up this year. (Population coverage area.) Mostly back-loaded.
- Why not building out as much as possible as competing LTE is coming in 2010-11? Barry West says LTE "will take longer."
- How will build? Focus initially on top 100 markets, thorough coverage. Understand the benefits of major metros covered, but need to serve lots of locations. 3G network will fill in while continuing to build. Bring price plans down to $40 or below? Not yet. Economics are good though.
- Call over.
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