Sprint Nextel (NYSE: S) is partnering with Clearwire (NASDAQ: CLWR), a broadband technology company, to build a nationwide WiMax network for cell phones, aiming to take the United States into to 4th generation (4G) wireless technology.
The partnership will enable the two companies to accelerate their existing WiMax network plans and build the first true nationwide WiMax network. The move would also push the US into the lead in terms of 4G deployment.
Many people figured that Sprint and Clearwire's alignment with competing entities â€“ cable operators and satellite companies, respectively â€“ would prohibit a partnership of this sort, Philip Solis of ABI Research said.
However, it has always been apparent to us that the synergies in a combined Sprint and Clearwire would allow formation of a unique service provider that would enable 4G capabilities ahead of its competitors.
WiMax provides wireless Internet speeds comparable to cable modems or digital subscriber lines, the same technology used to connect homes to the internet. The technology is likened to wireless networks used in airports and coffees shops, but can blanket whole cities.
Sprint Nextel said last year it is expecting to invest up to $800 million in 2007 and between $1.5 billion and $2 billion in 2008 in the WiMAX mobile broadband network. The bold move met an uproar from concerned investors, but the company believes it will give it a distinct advantage over competitors.
Our companies share a vision of doing for the Internet what cellular and PCS networks did for voice communications starting more than twenty years ago, said Clearwire Chief Executive Officer Ben Wolff.
Our joint efforts will result in customers benefiting from a more extensive network, operating sooner and using our respective spectrum more efficiently than either company could have on its own.
The 20-year partnership has three 10-year renewal periods and is expected to cover 300 million potential customers in the U.S. It plans to start rolling out the service in Chicago, Washington and Baltimore by the end of the year.
SprintNextel shares closed down 15 cents, or 0.68 percent, to $22.01 in Thursday trading on the New York Stock Exchange. Shares of Clearwire fared better, rising $8.52 percent, or 34.4 percent, to $33.30 during regular trading hours on the Nasdaq Stock Market. Shares declined 2 percent in after hours trading to $32.63.