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Sprint, Clearwire to reveal $12 bln JV: sources
2008-05-07
Sprint Nextel Corp (S.N) and Clearwire Corp (CLWR.O) are near announcing a $12 billion joint venture with major cable operators to offer services based on WiMax, an emerging technology that could make wireless Internet ubiquitous, people close to the talks said on Tuesday. WiMax is expected to blanket entire cities with Web access for mobile devices at speeds up to five times faster than traditional wireless networks, but it is a largely unproven technology. Shares in regular and afterhours trading rose a total 10 percent for Sprint and as much as 23 percent for Clearwire, after sources said the long-awaited deal may be announced as soon as Wednesday morning or afternoon after market close. "The deal is essentially done in principle," said one source. Sprint and Clearwire, which both have said they were looking for outside funding for their WiMax plans, will each contribute airwaves and network equipment that they have allocated for a network that they plan to build based on WiMax. The top two U.S. cable operators Comcast Corp (CMCSA.O) and Time Warner Cable Inc (TWC.N) will invest $1.5 billion between them, according to people familiar with the discussions. Comcast will contribute $1.05 billion, while Time Warner Cable will invest $550 million. Both are looking to compete better with rivals such as AT&T Inc (T.N) and Verizon Wireless. In addition, Intel Corp (INTC.O) is expected to contribute $1 billion, and Google Inc (GOOG.O) $500 million. Bright House Networks, the sixth-largest U.S. cable provider, has also been involved in the discussions, according to the sources, and will contribute $100 million. SPRINT PLANS Sprint, which has been bleeding customers from its existing service, had been criticized for plans to spend $5 billion by 2010 on WiMax. The No. 3 U.S. mobile service provider has also attracted interest from potential suitors including Deutsche Telekom (DTEGn.DE), according to reports. A merger of the German operator's U.S. arm T-Mobile USA and Sprint Nextel could create the No 1 U.S. mobile service. Sprint also may consider selling its Nextel unit, which it bought for $35 billion in 2005, potentially to private equity investors, according to a report in the Wall Street Journal. But while there is private equity interest in the company, the "odds of a stand-alone" deal are very low," according to a source familiar with the situation. A private equity firm would likely have to partner with a strategic bidder such as another telecom or cable operator, the person said. WIMAX VALUE WiMax is expected to support a range of applications including mobile video and to be embedded in a consumer electronics devices ranging from media players and cameras to laptop computers and communications devices. Jonathan Chaplin, an analyst at JPMorgan, said the venture was good news for the wireless companies, which will be able to offer wider coverage than they would have alone by combining their spectrum holdings. The cable companies pulled out of a previous wireless phone joint venture with Sprint last month called Pivot. One of the attractions of the new joint venture for the cable companies is that they have complete control over when and how it rolls out any new wireless products and services, according to people familiar with the plans. In the failed Pivot joint venture the cable companies had been dependent on each other to roll out new services. Cable companies said the Pivot venture involved too many "operational complexities." Comcast Chief Executive Brian Roberts told analysts on its earnings call last week the company does not have a competitive disadvantage to its rivals by not having a cell phone service. He said Comcast's wireless focus is to be in a position that it could potentially extend its current services beyond cable outside consumers homes if it chooses to. A WiMax 4G network offers the potential of carrying data such as video and games wirelessly. Intel is expected to benefit from the joint venture by making chips for WiMax-compatible wireless devices and laptops while Google is likely to explore mobile web advertising opportunities when the service launches. Sprint, Comcast and Time Warner Cable declined to comment. Clearwire was not immediately available. The Wall Street Journal first reported the news on its website on Tuesday. Google had no comment. Bright House and Intel were not immediately available for comment. (Reporting by Robert MacMillan, Yinka Adegoke, Sinead Carew and Megan Davies; editing by Richard Chang and Carol Bishopric)
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