Sprint banking on WiMax technology

TYSONS CORNER, Va. -- Sprint Nextel Corp. said Thursday it could spend as much as $5 billion by the end of 2010 on a new network based on the emerging high-speed wireless technology called WiMax.

Schaumburg-based Motorola is a supplier of WiMax equipment and the new network is expected to first roll out in Chicago next year. Other partners will include Nokia and Samsung Electronics Co. A Sprint spokesman declined to break out how much each partner will be paid.

WiMax is a technology that Sprint wants to use to blanket entire cities, enabling wireless Web access on everything from cell phones and laptops to video game players and cameras.

The technology is expected to support Internet access at speeds up to five times faster than typical wireless networks, though it is still slower than wired broadband such as DSL.

Some investors are concerned Sprint is betting on a largely unproven technology. But Chief Executive Gary Forsee said Sprint would benefit by getting ahead of rivals.

"We in fact will have a mobile broadband network at least two years ahead of other providers that will be out there," Forsee said at a company conference in Virginia, where Sprint is showcasing the technology.

Sprint said it expects to spend $2.5 billion on the network through the end of 2008 compared with its earlier estimate of $2.5 billion to $3 billion. The company expects to reach a potential 100 million customers in that time, with Sprint providing coverage to 70 million people and Clearwire covering 30 million.

Sprint expects its WiMax network to generate positive free cash flow beginning in 2011. Free cash flow refers to operating income excluding depreciation and amortization but including capital expenses, working capital and other cash requirements.

It also expects between $2 billion and $2.5 billion in revenue from WiMax in its fiscal year 2010.

Stanford Group analyst Michael Nelson said the company's capital spending estimate was in line with his expectations.

Others were not convinced.

"I'm skeptical of the revenue number certainly," said Todd Rethemeier of Surterre Research. "I find it hard to believe customers will be willing to pay for a broadband connection to their digital camera or their DVD player."

Sprint will market the new service under the Xohm brand (pronounced "zoam").