Sprint Nextel Corp. (NYSE:S) has lost about 3 million customers so far this year, which is making its 4G WiMax investments in Clearwire Corp. (NASDAQ:CLWR) all that more important. Rivals Verizon Wireless and AT&T Inc. (NYSE:T) operate a larger 3G network and are adding customers in the millions per quarter.
More importantly, the two giants also plan to roll out out their own 4G technology. So if Sprint is banking on decent return on investment, Clearwire will have to speed up its nationwide rollout and hope there are no unforeseen hiccups in the technology. What's more, Stifel, Nicolaus & Co. analyst Christopher King thinks Verizon's and AT&T's 4G tech will be
superior to Clearwire's. Intel Corp. (NASDAQ:INTC), creator of WiMax and an investor in Clearwire, may want to address that notion.
But it's not all about tech. Sprint and Clearwire may be first-to-market with 4G, but Minyanville.com cited an analyst
saying that Verizon is the first of the telecom companies to put out a solid plan for upgrading to 4G technology, with rollout expected to be completed by 2013.
In October, Sprint and Clearwire
announced 4G launches
throughout Texas, North Carolina and Hawaii. By the end of 2009, 4G
service is expected to be available in more than 25 markets covering
over 30 million people. Last year, Clearwire set high goals, saying it hopes to have between 120 million and 140 million customers in the U.S. on its WiMax network by the end of 2010. It needs financing to do that. Allowing for some breathing room, Clearwire happily announced Tuesday it will raise about $1.6 billion in
new investment capital from Sprint, Comcast Corp. (NASDAQ:CMCSA), Time Warner Cable Inc. (NYSE:TWC), Intel, Eagle River Holdings LLC and Bright House Networks LLC in exchange for newly issued shares priced at $7.33 apiece.
Clearwire CEO Bill Morrow said in a statement the additional financing will enable Clearwire to maintain its aggressive 4G WiMax network build plans. The company also said it would
offer senior notes worth around $1.5 billion to pay off its credit facility.
Clearwire will eventually need more money for the buildout, though.
Missing from the financing list is Google Inc. (NASDAQ:GOOG), which gave Clearwire about $200 million in May 2008 when Sprint combined its budding WiMax operations with Clearwire. Google would rather
help on strategy than give Clearwire more money right now. We have
details on the original investment that included the technology and cable giants mentioned above.
Sprint had the lion's share of the two investment rounds in Clearwire. Its latest total is about $1.18 billion. For a breakdown of the other investment totals, see
this press release. Sprint doesn't only need WiMax to come through. It needs a cool phone as subscribers scurry to the application-rich iPhone and to what is called the iPhone's biggest challenger yet -- Motorola Inc.'s (NYSE:MOT) Droid, which is exclusive to Verizon Wireless.
The New York Times
notes that Sprint is making progress, though. It introduced the Palm Pre smartphone, will begin selling the Palm Pixi -- a smartphone geared toward younger users -- and it began selling the HTC Hero this month. The NYT reports Sprint also said it would begin selling the Samsung Moment, which will also run on Android, Google's mobile operating system. The Google partnership stems from their mutual investment in Clearwire.
While less lucrative than contract customers, Sprint is pushing ahead in prepaid services, touting its Boost Mobile service and
acquiring Virgin Mobile USA for about $731 million.
According to our sister blog Dealscape, Sprint is
cutting between 2,000 and 2,500 jobs, about 6% of its 42,000 employees. It announced the cuts after reporting a third-quarter loss of $478 million. The latest layoffs come on top of 8,000 eliminated positions announced in January. The job cuts should save Sprint about $350 million.
Two thousand ten will be a huge make-or-break kind of year for Sprint. The economy appears to be stabilizing, and it will be the only provider of 4G technology. The 4G rollout will get help from Sprint's giant tech and cable partners in Clearwire and may just help it turns things around. -
Baz Hiralal
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