Sprint-Clearwire: Interview: Ben Wolff, CEO, Clearwire: Deal Is “Locked And Loaded”
By Tricia Duryee - Wed 07 May 2008 08:49 AM PST
Clearwire (NSDQ: CLWR) has pulled off an extraordinary deal that includes merging its WiMax operations with Sprint’s (NYSE: S), and raising $3.2 billion from Intel (NSDQ: INTC), Google (NSDQ: GOOG), Time Warner (NYSE: TWX), Comcast (NSDQ: CMCSA), Bright House Cable and Trilogy Equity Partners’ John Stanton. For more perspective, I interviewed Clearwire’s CEO Ben Wolff, who will head the JV once the deal is completed. Wolff, a lawyer by training, is known as a dogged deal-maker and negotiator. Wolff told me the key goals today are letting people know the deal is firm and that the new Clearwire “has all the makings of a game changer” that will “change the communication landscape of the country for the benefit of consumers.”
Negotiating a seven-way partnership must be the most complex deal of your career? Can you go into some details on how it was accomplished?: Wolff: “I think it may be the most complex deal anyone has ever done. ...On one hand, all of the partners bring something unique and complementary to the table—that’s a specific comment about the partners. A more generic comment is that when you are in negotiations with more than one company, it’s more complicated. A three-way deal is more complicated than two, and so on. There are folks out there who have said in the past that it’s impossible to do a three or four-way deal. A lot of people would have said this was impossible. I think it’s a real testament of the tenacity and intent and desire among all the partners to get this done....This has all of the industrial logic you can look for. Because of that, it’s a good fit. Everyone is incentivized to make the new Clearwire work and succeed because at the end of the day what we are all about is wanting access to a 4G network.” Lots more after the jump…
A lot of people are skeptical that this one will actually close, what do you say to those critics? : Wolff: “Will we actually get the deal to closing? We’ve all signed binding definitive agreements. It’s subject to a shareholder’s vote and regulatory approval, but otherwise, this is locked and loaded.”
No complications coming up like what happened a year ago with Sprint?: Wolff: “It’s a very different situation. The deal a year ago was a non-binding letter of intent that left a lot of details to be hammered out. This is 180 degrees from that, everyone of the details has been hammered out at this point. We’ve all signed binding definitive agreements—there’s no outs, people are obligated to go forward with the deal and there’s nothing left or guess work or secondary level of negotiations....That’s one of the reasons this deal took so long, we looked each other in the eye and said we weren’t going to go down the same path as we did a year ago.”
You said on the call that by the end of 2010, you will be able to cover 120 million people; how much faster will you be able to move with Sprint’s help? : Wolff: “So what we said on the call is that we want to cover 120 million to 140 million by the end of 2010. A number of things this deal does to get there: one is bringing all of the spectrum together in one place resolves interference issues helps us where we or Sprint didn’t have enough spectrum to deploy...That’s a huge, practical issue that gives us a leg up. Another thing, clearly, is giving us access to a larger and talented team. There’s not a huge pool of unemployed RF engineers out there. It’s a highly specialized area of the industry, and so we are thrilled to bring together the two teams together. The manpower is one of the key elements necessary to build out a network like this. Obviously, financial resources could be a limiting item, and being able to get the funding from our partners, the distribution that our partners will bring to the table will help on the revenue side. It minimizes risk and creates certainty on a number of fronts. That doesn’t mean we couldn’t have done it on our own, but it would have been different.”
When the deal is completed and the networks are rolled out, does this mean that in any particular market, the same network may be sold by three companies—Clearwire, Sprint and a cable operator? Will there be any exclusives? Wolff: ”We expect there to be full competition. The benefit to Clearwire, whether it’s a Comcast customer or Sprint customer or Clearwire customer, is that Clearwire is getting paid in all respects. In a sense, they are all our customers. It’s an issue of whether we are getting paid a wholesale or retail price, obviously there’s a cost-benefit analysis on all those. On our own retail customers, we manage billing and provisioning—there’s a whole variety of costs of being in retail. Having said that, there’s benefits to the retail business. It’s a win-win, and we’ll continue to have a retail business—a strong one—and we get to extend our reach by having the other distribution deals.”
It sounds like Google will get a lot out of this deal with a fairly big footprint on both devices for both WiMax and Sprint’s 3G network, is that right? Wolff: “I think that’s right, it’s a win for both of us. They are really good at what they do, and clearly getting into a true mobile broadband environment has the potential to have tremendous benefits to them, and us when you look at combining location-based services with advertising on a 4G network—that’s a trifecta. One of the reasons it appealed to them to work for us is that they understand that with a 4G network, they really can have a commitment to openness both with devices and applications. We don’t have the constraints to the same extent that a 2G or 3G network has and don’t have to manage as closely how bits are managed over the network...To their credit, when they say open, they mean open even as it relates to their competitors. But clearly we’ll have the opportunity of working with them from research and development standpoint and on up to build applications that are novel to our customers—but that doesn’t mean they have to take them.”
Are you surprised with the number of companies interested in the competing LTE standard recently?: Wolff: “I’m not, it’s actually a logical place for companies like Verizon (NYSE: VZ) and AT&T (NYSE: T) to go for a couple of reasons. First of all, they need to answer what is coming down the pike when it comes to the next generation—no operator can appear to be stagnant. It makes sense for them to say they are doing something, and because LTE is the next generation of 2G and 3G standards, and because that’s where some of the vendors are going, it makes sense for them to trial it. If you read between the lines, and look at actual commitments, you don’t see any firm commitments on spending or deployments—you do you see trial commitments. So, it’s not surprising for me that it’s something they would talk about. From a financial-markets perspective, LTE is far enough out that they can talk about LTE without having the markets get worried about another multi-billion investment company.”
Posted in: Companies, Operators, SprintNextel, Technologies, WiMax
