All Clear For WiMax Venture

Clearwire completes Sprint Nextel deal, gets cable investment

Wireless Internet provider Clearwire has closed a deal with Sprint Nextel to combine their fourth-generation wireless assets and pocketed a corresponding $3.2 billion cash investment from major cable and technology companies that should pave the way for Clearwire’s national rollout of WiMax technology over the next two years.

Under the Sprint Nextel transaction, which was first announced in May, and closed on Friday afternoon, Clearwire gets all of Sprint Nextel’s 2.5 gigahertz (GHz) spectrum and its WiMAX-related assets, including its XOHM business. The Kirkland, Wa.-based company has also received a $3.2 billion cash investment from cable operators Comcast, Time Warner Cable, and Bright House Networks; computer chip giant Intel; and Internet search leader Google.

Comcast invested $1.05 billion, Intel Capital invested $1.0 billion in addition to its previous investments made in Clearwire, Time Warner Cable invested $550 million, Google invested $500 million, and Bright House Networks invested $100 million. Clearwire is also to receive an additional $10 million investment from venture capital firm Trilogy Equity Partners in the coming months.

The cable companies will be wholesale customers of Clearwire and will resell its WiMax services to consumers under their own brand. Intel is making WiMax chips for laptops and other mobile devices, while Google is working with Clearwire to bring WiMax services to mobile devices using Google’s Android software platform. Clearwire is targeting a network deployment that will cover between 120 million and 140 million people in the U.S. by the end of 2010. The company currently provides mobile WiMax service in Baltimore, Md. and “pre-WiMax” services in 50 markets across the U.S. and Europe, counting a little over 500,000 customers.

"We look forward to providing our customers with exciting high speed mobile products,” said Comcast chairman and CEO Brian Roberts in a statement. “Our customers want access to the most innovative products both in and outside the home. With our new partners, we will deliver integrated mobile high speed Internet products for years to come."

In a conference call with reporters and analysts on Monday morning, Clearwire CEO Benjamin Wolff touted his company’s strengths, including its extensive spectrum holdings and IP-based network. With the Sprint Nextel spectrum, Clearwire has more than 100 megahertz (MHz) of spectrum in most major markets.

“We have an opportunity to reinvent wireless,” said Wolff, who added that Clearwire has a “pretty healthy lead in providing next-generation wireless services” compared to larger companies that are entering the space. That includes telcos AT&T and Verizon Wireless, which acquired significant chunks of 700 MHz spectrum in the FCC’s auction last spring and plan to roll out wireless broadband services using a different technology called Long Term Evolution (LTE).

Wolff also announced that Clearwire will retain its company name and will market its 4G services under the “Clear” brand. It will also launch a national marketing campaign with the tagline of “Let’s be clear.”

Bringing WiMax-capable devices to market is more important to Clearwire's success than a marketing campaign, of course. Wolff notes laptop computers with integrated WiMax chips are already being used by existing WiMax customers in Baltimore, as are USB modems, PC cards and residential gateway products that support WiMax. He expects that more WiMax-capable devices will roll out next year, including more mobile Internet devices like Nokia’s 810 tablet PC.

Wolff emphasized that Clearwire will operate as an independent company despite its rather powerful investors. He notes that Clearwire’s board will have only two directors affiliated with Sprint Nextel and one with Intel. The board will initially have eight members, with Clearwire founder Craig McCaw serving as non-executive chairman.

Along with McCaw, other directors are Dan Hesse, Sprint's chief executive officer; Keith Cowan, Sprint's president, strategy and corporate development; John Stanton, chairman and chief executive officer of Trilogy Equity Partners and former chairman and chief executive officer of VoiceStream and Western Wireless; Sean Maloney, executive vice president, chief sales and marketing officer of Intel; Frank Ianna, former president of network services for AT&T; Jose A. Collazo, former head of BT Global Services and former chairman, president and chief executive officer of Infonet Services Corporation; and Dennis Hersch, former global chairman of mergers and acquisitions for JP Morgan. An additional five seats on the board are expected to be filled in the coming weeks.

On the conference call, Wolff also downplayed the ramifications of a potential “format war” between WiMax and LTE such a previous format battles between VHS and Betamax video cassettes and Blu-ray and HD-DVD optical disc formats. He said that Clearwire assumes that “LTE will gain traction,” but isn’t worried because the two technologies have a “lot in common” and Clearwire’s vendors say they could supply transmission equipment capable of supporting both technologies.

“This isn’t the technology war that some have made it out to be,” said Wolff. “This isn’t a situation where one technology will win and one will lose.”