Google Inc. has made its biggest move yet on the U.S. mobile Web market by signing a deal with Sprint Nextel Corp. that positions the Internet company to build services to run on Sprint's planned WiMAX high-speed wireless network.
The two companies said on Thursday that Google will provide its Internet search service for a Web portal that Sprint is developing for the new WiMAX network. The gateway to various Web services will be ready in April 2008.
The deal is Google's closest alliance with a major U.S. mobile service provider.
While Google is the world's leading provider of Web search and has agreements with large mobile providers in Asia and Europe, analysts say it has lagged Yahoo Inc. in the U.S. wireless market.
This seems to be a bigger deal than what (Google's) done in the past, more comprehensive, said Pacific Crest analyst Steve Weinstein, who expects wireless services to be a very material driver for Google by late 2008 and early 2009.
Google has said wireless is key to growth and its strategy of selling Internet advertising.
Besides the deal with Sprint, Google is also lobbying the U.S. government to open up the wireless market and has expressed interest in bidding for airwaves at an upcoming government auction. It said it will spend a minimum of $4.6 billion if regulators push operators to open their networks.
The Sprint deal is expected to boost Web access over the new WiMAX network and expand use of Google's search and communications services on mobile devices.
Sprint said it would combine technology for detecting user location with Google tools including e-mail and chat.
For example, users could use Google to search for a pizzeria without having to enter a ZIP code, or have the phone automatically broadcast their whereabouts to friends when they are setting up a meeting using Google Talk instant chat service or e-mail on their phones.
Sprint's Chief Technology Officer Barry West said Sprint would not charge users for Google services, which will be supported by search-related advertising. Google and Sprint plan to share revenue from advertising.
If you think of the Internet you automatically think of Google, West said. Obviously having a powerful partner on the Internet helps us become synonymous with the mobile Internet.
Google already offers mobile Web search services through major wireless providers outside the United States, including Vodafone Group Plc, China Mobile, and Japan's KDDI.
Its U.S. partners to date have been smaller companies such as Leap Wireless and Helio, a joint venture of SK Telecom and EarthLink Inc.
Sprint, the No. 3 U.S. mobile service, has envisioned the WiMAX network connecting a host of consumer electronic devices such as cameras or media players and expects the portal to work on multiple devices.
WiMAX is expected to support Web access speeds five times faster than typical cellular networks, though slower than existing wired broadband services.
Some analysts had questioned the wisdom of Sprint betting up to $2.8 billion in 2007 and 2008 on an unproven technology, but JPMorgan analyst Tom Lee said the Google deal should ease investor concerns about WiMAX.
It really strengthens the legitimacy of WiMAX, Lee said, adding it would also help create interest among consumer electronic companies to make WiMAX compatible devices.
Sprint plans to connect its WiMAX network with Clearwire Corp.'s WiMAX network. Between them, they plan to offer coverage for a potential 100 million people by end-2008.
The agreement with Google could potentially create a new business for Sprint and Clearwire, according to Lee, who said Google could use their WiMAX networks to connect short-range wireless hotspots it is building in San Francisco.
West said that while using WiMAX to interconnect Wi-Fi networks is a possibility, there were no plans so far.
He also said Sprint could add popular features such as Google maps but that this was not laid out in the initial pact. If Sprint offers navigation services with WiMAX it would likely charge extra for these services, he said.
Sprint plans to test the WiMAX service in Chicago, Baltimore and Washington by the end of 2007, with a goal of attaining coverage for 100 million people by the end of 2008.
(Additional reporting by Michele Gershberg in New York and
Anthony Kurian in Bangalore)