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UPDATE: Sprint, Clearwire Terminate WiMax Agreement

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NEW YORK (Dow Jones) Sprint Nextel and Clearwire announced Friday that they are scrapping their agreement to jointly build a nationwide high speed wireless network based on WiMax technology.

The two companies had signed a letter of intent in July to pursue the partnership, which they had hoped to finalize within 60 days. But Sprint said the two companies could not resolve the complexities of the transaction and could not reach agreement on the terms of the deal.

People familiar with the matter also cited the departure last month of Gary Forsee as Sprint's chief executive as another complication.

The unraveling of Sprint and Clearwire's preliminary agreement is a blow to Clearwire. The company, founded by cellphone pioneer Craig McCaw, has staked its future on WiMax, a longer-range cousin of Wi-Fi that theoretically can provide wireless broadband access from laptops and cellphones at speeds comparable to what cable operators provide.

The agreement had called for the companies to share costs on a network that would reach 100 million people by the end of next year, with each side providing roaming rights to the other's customers. Sprint earlier had said it planned to spend about $5 billion on the network through 2010.

Spring now says it will review its WiMax business plans and expects to comment further on the topic early next year. However, it added that it remains "fully committed to developing WiMax services" and will continue to work together with Clearwire on future wireless opportunities.

Any slowdown in the rollout of WiMax by either Clearwire or Sprint would hurt companies backing the technology, including chip maker Intel and equipment makers Motorola and Samsung Electronics. Some of those companies may try to inject financing into Clearwire to help keep its WiMax project on track, people familiar with the matter said.

In many ways, the companies are natural partners, because they control complementary swaths of radio spectrum around the country and are the only two U.S. carriers pursuing WiMax.

In recent weeks, Sprint's board considered a variety of options with respect to the Clearwire partnership, including the idea of spinning off Sprint's WiMax unit and merging it with Clearwire or bringing in a consortium of strategic investors to help finance the project. Any significant transaction would likely have to wait for Sprint to hire a new CEO, people familiar with the matter say.

The new CEO will have even bigger issues to deal with, including Sprint's hemorrhaging of customers in its core cellphone business. Sprint, which has 54 million customers, is losing market share to larger rivals AT&T and Verizon Wireless because of customer-service problems and other issues stemming from the 2005 acquisition of Nextel Communications.

Separately, Clearwire also reported that its third-quarter net loss widened to $329 million, or $2.01 a share, from $60 million, or 61 cents a share, a year earlier, because of a one-time charge of $159 million. Revenue jumped to $41 million from $27 million.

- John Flowers, Dow Jones Newswires; 201-938-5964; john.flowers@dowjones.com

- Amol Sharma; The Wall Street Journal

(END) Dow Jones Newswires­

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