SPRINT Nextel Corp is combining its planned high-speed wireless network with Clearwire Corp, creating a US$12 billion venture with funding from technology and cable companies, industry sources revealed to Bloomberg News yesterday.
Companies such as Intel Corp, Comcast Corp, Time Warner Cable Inc and Google Inc will invest more than US$3 billion in the network, which uses a technology called WiMax, the insiders said.
The agreement lets Sprint scale back spending after an exodus of mobile-phone customers hurt profit last year. It also builds support for WiMax, which can blanket whole cities with network coverage. The technology could help Sprint compete with larger rivals AT&T Inc and Verizon Wireless by providing faster Internet access.
"This could remove a potential distraction for Sprint," said Michael Nelson, an analyst at Stanford Group Co. in New York. "They need to increase their focus on fixing their core business."
Sprint rose 65 cents, or 7.1 percent, to the equivalent of US$9.84 in Germany from the close of US$9.19 in regular New York Stock Exchange trading yesterday.
The Kansas-based company's stock gained in extended trading yesterday after the agreement was reported by the Wall Street Journal. Clearwire gained 14 percent in extended trading after closing at US$16.46 on the Nasdaq Stock Market.
Sprint enlisted big technology companies such as Google and Intel to take on AT&T and Verizon, the two largest U.S. mobile-phone companies. Sprint is the only one of the three carriers to commit to the WiMax technology, which risks limiting the standard to a smaller pool of users.
Loss of customers
The company lost more than 1 million mobile-phone contract customers in 2007.
"In terms of economies of scale for WiMax, Sprint's deal is the biggest deal out there," Yankee Group analyst Phil Marshall said in an interview from Boston. "The WiMax industry is holding out very high hopes for the Sprint network to be successful."
WiMax offers wider coverage than today's wireless-fidelity, or Wi-Fi, systems, which deliver Internet access to smaller areas such as buildings and parks. While AT&T and Verizon are backing a rival technology called Long Term Evolution, they say it may not be ready for at least two years.
Clearwire and Sprint had scrapped a WiMax alliance in November after agreeing in July to team up. The new accord may bolster Clearwire, which has yet to turn a profit.
Comcast and Time Warner Cable, which compete with AT&T and Verizon Communications Inc for land-line phone and Internet connections, can use WiMax to challenge their rivals' mobile-phone services.