Communication and Technology Companies to Create First Nationwide WiMAX Network in the U.S.

by Anton Shilov
05/07/2008 | 07:33 AM

Clearwire Corp., and Sprint Nextel Corp. on Wednesday said that they had entered into a definitive agreement to combine their next-gen wireless broadband businesses to form a new company that would build the first nationwide WiMAX network in the USA. Numerous communication and technology firms, including Bright House Networks, Comcast, Google, Intel and Time Warner Cable, will invest into the project.

“This agreement is a historic step forward for WiMAX as it represents the first nationwide deployment of a next-generation mobile broadband Internet in the U.S.,” said Paul Otellini, Intel president and chief executive officer.

Upon completion of the proposed transaction, Sprint will own the largest stake in the new company – which will be called Clearwire – with approximately 51% equity ownership on a fully diluted basis assuming an investment price of $20 per share. The existing Clearwire shareholders will own approximately 27% and the new strategic investors, as a group, will be acquiring approximately 22 % for their investment of $3.2 billion, both on a fully diluted basis assuming an investment price of $20 per share. The total transaction value will be approximately $14.5 billion assuming an investment price of $20.00 per share.

In addition to its 2.50GHz spectrum, Sprint will contribute to the new Clearwire certain hardware, software and all of its WiMAX-based trademarks and other WiMAX-related intellectual property. The new Clearwire expects to materially reduce capital and operating expenditures by leveraging Sprint’s existing infrastructure, reducing the cost of building out the mobile WiMAX network nationwide. The new Clearwire expects to utilize Sprint’s towers, fiber network and IT support at favorable bulk rates. Sprint also will realize cost savings for its core business by sharing certain costs of towers and other infrastructure.

“The power of the mobile Internet, which offers speed and mobility, home and away, on any device or screen, will fundamentally transform the communications landscape in our country. We believe that the new Clearwire will operate one of the fastest and most capable broadband wireless networks ever conceived, giving us the opportunity to return the U.S. to a leadership position in the global wireless industry,” said Clearwire chairman Craig O. McCaw.

It is expected that the new Clearwire will have a time-to-market advantage over competitors in fourth generation services, supported by strong spectrum holdings and a national footprint. Further, it will build on the strong foundation of Clearwire’s rapidly growing subscriber base of nearly 400 thousand wireless broadband customers as of year-end 2007, as well as Sprint’s continued XOHM WiMAX network build-out in certain markets throughout this year.

Sprint and Clearwire also announced a series of commercial agreements with the strategic investors, including 3G and 4G wholesale agreements as well as the following:

• Intel will work with manufacturers to embed WiMAX chips into Intel Centrino 2-based laptops and other Intel-based mobile Internet devices, and will market the new company’s service in association with Intel’s notebook PC brand.
• Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices.
• Google will partner with the new Clearwire on an open Internet business protocol for mobile broadband devices. The new Clearwire will support Google's Android operating system software in its future voice and data devices that it provides to its retail customers.
• In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product.
• Sprint, Comcast, Time Warner Cable, and Bright House Networks will enter into wholesale agreements with the new Clearwire, becoming 4G providers of new Clearwire’s mobile WiMAX service.
• Comcast, Time Warner Cable, and Bright House Networks and, after completion of the transactions, the new Clearwire, will enter into 3G wholesale agreements with Sprint, becoming bundled providers of Sprint’s wireless voice and data services, expanding the reach of Sprint’s network to more customers, while providing the cable companies a simpler, more effective vehicle to bundle wireless services.
• Sprint and Google have also entered into an agreement related to Sprint’s mobile services, whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint. Sprint will also preload several Google services - including Google Maps for mobile, Gmail and YouTube - on select mobile phones and provide easier access to other Google services.
• Google and Intel have options to enter into 3G and 4G wholesale agreements with Clearwire and Sprint respectively and have no current plans to do so.