Will the $3.2B Sprint + Google+(et al…) mega-deal bring WiMax coast-to-coast in the USA?
Back on June 8 2008 we wrote about a deal announced by Sprint and Clearwire, that was the best news for WiMax imaginable: http://tinyurl.com/cjo59d
Money flow... the Sprint - Clearwire deal!
This is a Mega-deal between Sprint, Google, Clearwire, Comcast, Time Warner, and Intel, which was intended to create “the NEW Clearwire”, facilitating a nationwide rollout of 4G WiMax wireless broadband. At the time we pointed out that the equity and bond markets would need to remain healthy in order for this deal to happen. And that it would need to be cleared by regulators, not to mention lawsuits and appeals from NexTel dealers claiming breach of contract. There were some checks written, but Clearwire currently has only a minimal WiMax “footprint” in Portland, Baltimore, Boise, and Las Vegas. At least $3 to $5B more would be required to build out WiMax nationwide. Analysts don’t expect Clearwire to become profitable for six years. They will report a $688M loss for 2008.
Since the public markets are essentially close to Clearwire, their partners in this deal will need to remain willing to write some more large checks. That would be based on faith that “the new Clearwire” will be treated (valued) fairly by the financial markets. That could be difficult with many quarters of heavy investment required, to build out a nationwide WiMax infrastructure.
Jan 22 2008, Google wrote off it’s $350 to-date investment in Clearwire; a detail that was barely noted by analysts. “We remain optimistic”, said a Sprint/Clearwire spokesman. It is estimated that Clearwire will need $10 to $50B just to get the rollout started in earnest. Total capital requirements to blanket US Cities in WiMax run higher.
BCG interviewed the Sprint Executive responsible for the XOhm launch atthe NxtComm conference in Las Vegas in June 2008. We learned that Sprint will offer a new PC modem, similar to their current $60-80/mo2.5/3G data modems, that will “auto-sense” 4G WiMax towers, delivering WiMax service to Sprint customers whenever and whereever service is available. We got answers to dozens of other questions, and left wit hpages of notes. Clearwire’s WiMax service should start to show up in Portland, Boise, Las Vegas, Baltimore, and up to five other US Cities during 2009.
So now the question becomes – in this environment, can the deal still work, leading to large-scale national deployment of 4T WiMax? Will private equity ride in to the rescue? Will someone step up and invest many tens of Billions of dollars, with LTE looming from Verizon and AT&T? Or will the cable players balk, and use this as a negotiating card to cut a wireless deal elsewhere? How about Verizon picking up Sprint on the cheap?
We’ll follow this up in Q3 2009 after Startup Trek visits US WiMax cities and tries out the new “Clear” branded WiMax service.