Earlier today, I posted this at Buzz About Wireless. I thought y’all would appreciate it too:
Earlier this year, Sprint announced a huge (and complex) deal to merge our Xohm WiMax business with Clearwire. The new company would receive $3.2B in funding from strategic investors including Intel, Google, Comcast, Time Warner Cable, and Bright House Networks. On Friday, the deal was completed. The company has also announced that their Mobile WiMax services will be branded “Clear.” Ben Wolff, Clearwire’s CEO said Clear “is a natural choice because it is a simple, commonly used word that has significance as it relates to communications services and, of course, it is part of our corporate name.”
But why is this transaction such a big deal? And why does it make sense for everyone?
Let’s start with the folks that really matter – the customers. The Clearwire deal means that 4G services will be available in a growing number of markets starting NOW. 4G is true broadband IP, truly mobile. WiMax has performance characteristics that are “just like” landline broadband services (multi-megabit bandwidth, very low latency, open all-IP networks, etc.) – supporting all the things you’re used to doing on your previously tethered broadband connection. WiMax has all the additional benefits of being truly mobile – location awareness, personalized to you, and always-with-you/always-on (even at 70MPH). Who here can’t appreciate that?
Sure, other carriers are talking about offering 4G services in the future, but don’t expect that future to arrive before 2010 at the earliest. This deal makes 4G a reality now!
So, why does it make sense for Sprint? Prior to the announcement of this deal, Sprint’s WiMax rollout was generally considered to be at risk. The main reason was because of the huge amount of capital required to build a new 4G network. Since WiMax really is a new technology, rolling out the network requires a complete new network build, not just an upgrade to our existing network. The cash required for that buildout had to compete with all the other areas of Sprint for funding. Could we afford to build the 4G network and improve customer care, roll-out exciting new handsets, build IP-based convergence solutions, improve network coverage, introduce Ready Now, develop One Click, etc? Maybe, but it would be hard. This deal allows Sprint to focus all of our capital decisions on our core current generation business.
The beautiful thing about the deal, though, is that it still gives Sprint a huge 4G jump on our competitors. Sprint will be the only wireless carrier selling Clearwire’s 4G services. Our customers will be able to enjoy our full portfolio of CDMA, 3G, iDEN, and Wireline offers PLUS 4G WiMax services through our existing sales channels. It’s like enjoying your cake and eating it too.
So what about the original Clearwire? Why does it make sense for them? Clearwire had pieced together a substantial portfolio of spectrum, but even so, what they had was far from nationwide. Sprint’s equivalent spectrum holdings in the 2.5 GHz space were very complimentary, providing a nationwide footprint with unmatched capacity. Wolff said “We are the underdog. There are other much larger companies that aspire to do what we do. While they will get there sooner or later, we have some advantages that will give us a pretty healthy lead. A lead that can’t be overcome by simply being bigger. Perhaps, most important is our spectrum holdings. Clearwire now has more spectrum available for 4G services than all of the national wireless carriers combined.”
But building that network and selling services aren’t easy either. The strategic investors provide Clearwire with $3.2B in capital that will go a long ways toward building a nationwide network. Just as important, the existing customers and channels represented by Sprint, Comcast, Time Warner, Bright House, Google, and Intel will also be critical in filling that high capacity network with revenue-generating traffic.
And what about the investors? Why is this deal a win for them? Clearwire represents an open Internet business model which enables each of the strategic investors to accomplish their business goals around WiMax. For each, those goals are a little bit different, so structuring an agreement that satisfies all those needs has been a masterstroke. Congratulations to the team for pulling it off.
So, what do you think? Is this deal the win-win-win-win that I’ve portrayed it as? I look forward to your reactions!
