Sprint Nextel Corp. said on 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 known as WiMax.
The No. 3 U.S. wireless service said it expects spending on the network through the end of 2008 to be at the low end of its previously announced estimates due to its agreement to connect its network with Clearwire Corp., a small wireless service provider.
WiMax is a wireless technology that Sprint wants to use to blanket entire cities, enabling wireless Internet 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 that Sprint is betting on a largely unproven technology. But Sprint Chief Executive Gary Forsee said the company would benefit by having an advanced network ahead of its 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's shares fell 1.8 percent to $18.30 on the New York Stock Exchange. Clearwire slipped 2.6 percent to $22.90.
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.
Sprint expects to reach a potential 100 million customers in that time, with the company providing coverage to 70 million people and Clearwire covering 30 million people.
Sprint, which will market the new service under the Xohm brand (pronounced zoam), said it expects coverage to expand to 125 million people by 2010 at an additional cost of $2.5 billion, bringing the total network spend to $5 billion.
But that expansion will depend on the success of the service, Sprint said.
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.
Last month Sprint said it would cut the initial costs for building the network through its partnership with Clearwire. The two companies plan to connect their services and allow customers to move between their networks.
Sprint also has an agreement to feature Google's Web search services via a portal tailored to WiMax devices.
Barry West, president of Sprint's high speed wireless unit, said in a presentation that the company has commitments from device makers to embed 50 million units in the United States with WiMax connections over the next three years.
Sprint has previously announced the top three mobile phone makers as technology partners for its plan to start offering services based on WiMax next year. These are Nokia, Samsung Electronics Co. and Motorola Inc..