Sprint, Clearwire combine new networks
KANSAS CITY, Mo. -- Clearwire and Sprint Nextel said Wednesday they will combine their wireless broadband units to create a $14.55 billion communications company.
The new company, which will retain Clearwire's name, will continue developing a mobile network based on WiMax technology, which promises faster speeds than the latest cellular networks for movies, games and other data services.
A group of outside investors, including Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks, will kick in $3.2 billion for the new company. The investment is based on a target price of $20 per Clearwire share and will give the companies a 22 percent stake in the new venture.
Clearwire, a Kirkland, Wash.-based startup founded by cellular pioneer Craig McCaw, will also receive an investment from Trilogy Equity Partners.
Overland Park, Kan.-based Sprint Nextel Corp., which has operations in Oak Brook, will be majority owner with a 51 percent equity stake, while existing Clearwire Corp. shareholders will receive about 27 percent interest.
The new company is looking for a U.S. network deployment reaching 120 million to 140 million people by the end of 2010. Company officials said they'll need up to $2.3 billion more in funding by getting additional investors or borrowing. They also could simply shrink the size of the network.
Both companies have separately pursued rolling out WiMax networks. They characterized their joint venture as a way to speed along development and adoption of the technology, which could eventually compete with fixed-line broadband.
Rivals such as AT&T Inc. and Verizon Wireless have eschewed WiMax, opting instead for upgrades to their current wireless broadband networks and a future technology called Long Term Evolution.
Clearwire will sell WiMax services back to Sprint and the cable partners, through a "mobile virtual network operator," or MVNO, business model. One of those partners, Comcast, has Midwest operations in Schaumburg. There are no plans, however, to offer similar access to service providers not part of the joint venture.
"The agreement enables us to get to market faster and reach a broader audience than we could have if we went alone," Dan Hesse, Sprint Nextel's chief executive officer, told analysts during a conference call Wednesday.
For Sprint, the deal gets an operational monkey off its back and allows management to return to salvaging its troubled wireless business, which has suffered a steady hemorrhaging of subscribers. It also could quiet critics who consider WiMax experimental and expensive -- one estimate had Sprint paying more than $5 billion to rollout the service.
Clearwire gets new capital, infrastructure and broadband spectrum, as well as further validation of its technology.