Cell Life

WiMAX got a new lease of life yesterday in the developed world. Sprint announced a breakthrough agreement with ClearWire of Kirkland, Washington to create a joint venture under the name ClearWire but with 51% stake owned by Sprint, 27% by ClearWire investors and the remaining by some other high profile investors. Sprint is the third largest US wireless operator and is betting on WiMAX in 4G race as opposed to AT&T and Verizon, the two biggest US mobile operators, who are betting on GSM version of 4G called LTE or Long Term Evolution. WiMAX has the unique advantage over LTE as WiMAX equipment is available now and LTE is 2 years behind WiMAX.

The deal with ClearWire is a complex transaction with an alpha-soup list of investor firms participating including Comcast, Intel, Google, and cable operator Bright House Networks. Why are these firms interested ? Intel needs a new chip wave now that Centrino is everywhere already. Plus Intel has been investing in WiMAX chip development as the next evolution of the WiFi enabled chip. Google is the preferred search provider on ClearWire WiMAX devices and its Android platform will find a big network partner. Comcast and Bright House are looking for a way to expand into high speed mobile services and wireless broadband - now that AT&T and Verizon are beginning to erode cable market share with their own high speed TV offerings and innovative quad-play bundling of wireless, wireline, TV and internet. Essentially bundling is the new mantra for getting customers and cable providers need a wireless channel partner to cover this one missing piece in the cable package.

With this WiMAX deal, Sprint has one less thing to worry as it was coming from low cash liquidity position and needed money to launch a 4G offering - it got its wish fulfilled by getting some partners with big pockets to invest in its nascent 4G endeavour. Now it can go back to focusing or investing in its core CDMA business and in time make it attractive enough to sell to interested parties, eg Deutsche Telekom at a good price. Sprint Xohm service, its WiMAX trial launch service, is all but dead or in essence, will be merged into ClearWire. Sprint is taking a non-operating role in ClearWire and is talking about having ClearWire manage itself independently with separate wireless assets and separate management structure.

Well - the ClearWire deal looks interesting on the face of it and Sprint does have one less thing to worry about now that its WiMAX / 4G path is clear. But in reality, the challenges remain. With an alpha-soup combination of ClearWire investors, this firm will be chauffeured by multiple backers with sometimes varying agendas. Historically speaking, such complex deals have a high failure rate. Plus it remains to be seen if Sprint core CDMA service ends up competing with its WiMAX offering. We think success of ClearWire depends on letting it be a truly independent company with dedicated management and letting it compete openly.

In any case, WiMAX got a new lease on life. Now with this announcement, it will trigger a chain reaction and network equipment vendors like Nortel, Samsung, AirSpan, Lucent etc will make hay by selling WiMAX equipment. Intel will sell chips for WiMAX - PCs with WiMAX-enabled chips will be hot. More PC software will be sold.  Google gets a mobile momentum on next generation wireless network. Cable firms have a high speed mobile partner. Nokia and other device makers will sell high end WiMAX phones. Consumers get truly personal mobile broadband everywhere, on their cellphones and laptops. They can potentially ditch their wired DSL or cable modems and replace it with wireless broadband. Everybody is happy at the end of the day. Lets see if this theory works or not. Regardless, the ClearWire announcement may trigger a larger WiMAX adoption in other developed countries. So far WiMAX growth story was limited to developing countries in Asia, Sprint announcement is a big boost to this technology in the western hemisphere.

MT