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Current Issue: December 2007
Mobile WiMAX suffers U.S. setback
by Ken Wieland
Now that the mobile WiMAX letter of intent (LOI) between Sprint Nextel and Clearwire has been ripped up, where does the 802.16e camp stand? Opinions are divided in the analyst community after the initial plan between these two companies to coordinate a nationwide mobile WiMAX U.S. rollout was scrubbed.
"The fact that Sprint could potentially downsize its WiMAX plans is bad news for WiMAX in general," says Julien Grivolas, a senior analyst at Ovum. "Since Sprint revealed its WiMAX plans, the operator has been playing a critical role in the WiMAX industry, giving a huge boost to the technology in terms of credibility first but also in contributing to create a strong ecosystem around the technology. Many operators [had] their eyes focused on what Sprint was doing and how it was progressing."
Geoff Blaber, research director with wireless consultancy CCS Insight, is more sanguine about mobile WiMAX’s prospects. "In the short term, the termination of the LOI will, inevitably, have an impact on the mobile WiMAX camp," he says. "Longer term, however, I don’t see this as being a major setback. It might push back the planned U.S rollout from 2008 until 2009, but I can’t see Sprint backing out. They have already invested quite a bit in mobile WiMAX, but we’ll get a clearer picture when Sprint appoints a new CEO."
Sprint Nextel has been struggling of late (see Sprint Nextel loses out to main rivals, at right), which led to the departure of CEO Gary Forsee last October. Forsee is often credited as the main architect behind Sprint’s ambitious nationwide mobile WiMAX plan, but Blaber believes the Sprint board is equally committed and his departure does not signal the end of Sprint’s interest in mobile WiMAX. "The collapse of the LOI is in all probability a reflection of the complexity of trying to integrate two very different businesses," he says. "It’s not a case of Sprint backing out."
Clearwire and Sprint Nextel signed the LOI back in July. By sharing spectrum resources and coordinating mobile WiMAX rollout, the plan was to reduce the two companies’ capex outlay (although no hard figures were released by them on the projected scale of cost savings). Sprint did, however, outline plans prior to the LOI that it would cost around US$5bn to build out a nationwide mobile WiMAX network.
One condition of the LOI was that both Sprint Nextel and Clearwire were prohibited from forming partnerships with other companies related to mobile WiMAX rollout. Now that this restriction has been lifted, speculation about other potential mobile WiMAX partners has surfaced (particularly the cable operators, which already have a partnership with Sprint to offer voice services to their customers). At press time, neither company had revealed any partnership announcements although it is conceivable Clearwire and Sprint will work together, most likely, Blaber says, in relation to roaming agreements.
Clearwire looks most vulnerable after the collapse of the LOI. Its share price fell by 25 percent immediately after the announcement, while Sprint Nextel’s remained steady. Ben Wolff, Clearwire’s CEO, acknowledged at the company’s 3Q07 press conference there was a "funding gap" for its nationwide mobile WiMAX plan but would not disclose its extent.
As for beleaguered Sprint Nextel, it is in a period of belt-tightening. Capex has been cut back from US$1.7bn in 2Q07 to US$1.2bn the following quarter. The company projects capex for this year will be around US$6bn compared to a previous projection of US$7.2bn. Sprint Nextel says it has already spent US$73m on mobile WiMAX during 3Q07 and claims it is still aiming for a "soft launch" of the service in Baltimore, Washington and Chicago by the end of this year.
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