For a time, it looked like there was no stopping WiMAX, a form of
wireless broadband that can blanket whole cities for less than rival
technologies cost. WiMAX is backed by a who’s who of telecom and
consumer electronics firms and carriers around the globe with grand
plans to roll it out in the coming months. But all that changed on November 9th…

Clearwire CEO Craig McCaw

On November 9th Sprint Nextel announced it was shelving a plan to build and operate a nationwide WiMAX network with Clearwire, the provider formed by cellular pioneer Craig McCaw.

Clearwire and Sprint said in July they would join forces in the creation of a nationwide network by the end of 2008. But they were unable to iron out a final
agreement that suited both parties. Executives at the companies
declined to identify the sticking points, and representatives of both
parties left open the possibility of a revised deal in the future.
"It’s fair to say we are looking and exploring all of our potential
strategic options," Clearwire CEO Ben Wolff told analysts on a Nov. 9 conference call.

The split comes as a setback for the companies, including Intel,
that have invested in WiMAX and are hoping to profit from the adoption
of a new global wireless standard. "Certainly we’re disappointed by
this, but I don’t think the announcement changes anyone’s commitment or
plans," says Intel spokeswoman Kari Aakre. Indeed, there’s no
indication Sprint or Clearwire intend to give up on WiMAX, though
they’ll need to find a better way to make it work—possibly with
different partners.

Sprint’s Interim CEO Paul Saleh

Of the two, Sprint Nextel needed the most breathing room. Sprint Nextel ousted CEO Gary Forsee
in October amid investor dissatisfaction over the company’s high
subscriber defections, its poor integration with Nextel, and questions
about its WiMAX plans. Interim CEO Paul Saleh admitted at the time the company had lost focus.

Sprint’s board may have felt uneasy making decisions that could set the
course for the company’s future before a permanent CEO is named, says
Daryl Schoolar, senior analyst at researcher In-Stat/MDR.
Clearwire has been concentrating largely on alternative broadband
service to the home, while Sprint has been more interested in mobile
services to differentiate itself from larger rivals AT&T and Verizon Wireless, which is a joint venture of Verizon Communications and Vodafone.
"I suspect their business plans didn’t mesh, so they are left to
negotiate with a temporary CEO," Schoolar says. "This could be just a
short-term issue."

According to sources familiar with Sprint’s plans, executives at the
Reston (Va.) carrier are holding out for a better WiMAX deal early next
year that will please investors and customers alike. It had committed
to spending $5 billion on the creation of a WiMAX network. As the
holder of the largest block of unused wireless spectrum in the U.S.,
Sprint Nextel is entertaining the possibility of teaming with a winner
in an auction of wireless airwaves to be held by the government in
January, sources say.

One potentially attractive partner for Sprint—or Clearwire—is Google.
The Web search leader already has struck a deal with Sprint to offer
services on the carrier’s WiMAX network. On Nov. 5, Google announced
plans for a mobile-phone operating system and the creation of an alliance of companies that will help create tools and features
for use in that system. The Open Handset Alliance includes many of the
principal WiMAX backers, including Intel, Samsung, and Motorola.

Google also has expressed interest in bidding on the spectrum auction,
though most analysts expect it to team up with an established player to
build and run a wireless network.

Clearwire may be under the most pressure to find new partners and
financing. It is only now transitioning to a true WiMAX network, after
using a precursor technology in its early few years on the market. The
company, which is also pursuing international expansion, may need
billions of dollars in additional investment if it chooses to go it
alone. "With the possibility of such an agreement having been
eliminated [for now], this event is clearly a negative for Clearwire,"
says Sid Parakh, an analyst at securities firm McAdams Wright Ragen, which kept a buy rating on the company’s stock.

With so much interest in seeing WiMAX succeed, Intel could step in as a
Clearwire partner, some analysts speculate. "If we find out that Intel
is committing $300 million to Clearwire’s expansion, that would be good
news," says Richard Doherty, director of researcher Envisioneering
Group. "You can be assured that they like to see green lights, and now
they are seeing flashing yellow for North America."

Via Business Week