Sprint-Clearwire: Hesse: Spectrum Combo Puts New WiMax JV Two Years Ahead Of Competition
By Tricia Duryee - Wed 07 May 2008 06:22 AM PST
Dan Hesse has only been CEO of Sprint (NYSE: S) Nextel for the last five months but he’s already solved—at least on the surface—one of the company’s most pressing problems—the future of WiMax. Hesse took the lead on this morning’s conference call to explain the $14.5 billion deal to analysts and investors:
-- “This has been a complex puzzle to solve,” Hesse said. They wanted to leverage their position in the 2.5 MHz spectrum holdings, while continuing the momentum of WiMax, and maintaining the time-to-market over other competitors and technologies, and “realizing the natural synergies between its 4G and 3G” products, distribution and infrastructure. Stabilizing the company financially was also a goal. These things “lined up solidly with Clearwire,” and “quickly determined it was a natural fit.”
-- “The new Clearwire (NSDQ: CLWR) will have an enviable 40 billion MHz pops position,” which is “the largest spectrum position owned by any one company.” That puts them at least two years ahead of the competition. More on the conference call after the jump…
-- In addition to ownership stake, Sprint is also signing MVNO agreements with all of the cable operators that will “bring additional immediate benefits to Sprint.” In the new Clearwire, Sprint won’t be involved day to day, but “our position as the largest shareholder, allows us to provide strategic input” on products and services, while maintaining financial flexibility and the ability to focus on its core business.
Ben Wolff, Clearwire’s current CEO and the new company’s leader, provided a look at what’s coming:
-- Its first mobile WiMax network being built in Portland is seeing speeds of 5 to 6 mbps on the downlink and 2 to 3 mbps on the uplink while going down the freeway. It’s a network that “stands to change the game.”
-- “Expanded relationships with Intel (NSDQ: INTC) and Google (NSDQ: GOOG) will expand our vision of an open network,” and “enables us to tap into some of the greatest innovators of our time.”
-- The wholesale 4G relationships with the cable operators will bring in a new revenue stream for Clearwire. ”It’s much more than a Clearwire and Xohm combination,” he said. “given the complexity of the transition we’ve taken the time and effort to do it right,”
-- Cost efficiencies: Clearwire will be able to use Sprint’s cell towers at a below-market rate, and other infrastructure including the company’s backhaul and back-office systems, even using its sales force to get big goverment and business contracts. It will also lean on Sprint’s partnerships with handset makers, such as Nokia (NYSE: NOK) and others.
-- Despite raising $3.2 billion, they will still need $2 to $2.3 billion before the company gets to cash-flow positive. “The gap will be less if we choose to build a smaller footprint...we should be able to access debt financing for future requirements.”
-- Before neither Sprint or Clearwire has a nationwide footprint, following the close they will. “WiMax is real and it’s here now,” With what we are seeing in Portland, “we’ll be able to deliver greater speeds and throughput than what’s available on today’s legacy networks.” The goal is to deliver four times the performance at one-tenth the cost.
-- Product road-map: To support this vision, we are working closely with vendors to increase the number of devices. WiMax PC cards and embedded chipsets in laptops will come later this year, and in ‘09 “we expect to see them embedded in consumer electronics.”
Q&A: Hesse shot down efforts to talk about other possible sales or deals. Does the deal preclude any other sales for Sprint, like the sale of Nextel?: Hesse said that they aren’t on the call to talk about any other deals that may be in the works: “I’m not aware it would preclude any other options to what Sprint may or may not consider.”
-- How is the deal with the cable operators different than Pivot?: Hesse said they will have much more control over the wireless experience, including the brand, using the classic MVNO model.
-- Thoughts on LTE: Barry West, Sprint’s CTO said: “We’ll likely to see early trials in 2010, but a full-fledged build out will take longer.” Clearwire’s goal is to build out a network to covering 120 million people by 2010. “Building faster is a matter of logistics. I think our target of 120 million pops is aggressive by any standards, it’s sure logistics.” Wolff added: “The build plan we’ve laid out will be one of the largest and fastest buildouts ever done. We have the capability to do it, but it’s a massive under taking.”
-- How long will the capital last?: “If we go on the current build schedule, we’ll look at capital getting to mid-2010 with100 million pops covered. We can rachet that back.”
Posted in: Companies, Operators, SprintNextel, Technologies, WiMax
