After months of wrangling, Sprint Nextel and Clearwire now are the best of financial friends, with the former finally agreeing to pay the latter at least $1 billion this year and next for 4G wholesale services.
The deal is an amendment to a long-term agreement between Sprint (which owns more than half of Clearwire) and the WiMAX operator for wholesale pricing, and it establishes minimum usage commitments of $300 million in 2011, $550 million in 2012 and $175 million in pre-payments for 4G wholesale services to be used in 2011, 2012 and beyond.
In addition, both carriers can resell Sprint’s 3G network and Clearwire’s 4G WiMAX network to other parties, thus potentially opening up new market segments for both Sprint and Clearwire. They now can pursue and secure other service contracts jointly or separately.
The Clearwire 4G network also is backed by Comcast, Time Warner Cable, Intel, Google and Bright House Networks.
"We are pleased to reach this wholesale pricing agreement with Clearwire,” said Sprint CEO Dan Hesse in a statement earlier today. “We look forward to working with them under this new agreement to provide an expanded offering of 4G capabilities and solutions for Sprint customers.”
Added John Stanton, financial guru, former T-Mobile USA leader and now interim Clearwire CEO, “Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago. Today’s agreement further aligns Sprint and Clearwire’s interests, and lays the foundation for a continued, constructive relationship."
The carriers also reached an agreement regarding wholesale pricing for Sprint devices that operate both on Sprint’s 3G network and Clearwire’s 4G network. This includes such smartphones as the HTC EVO 4G, the Samsung Epic 4G and other dual-mode devices like the newly introduced Novatel Wireless MiFi 3G/4G Mobile Hotspot 4082.
While leaving some to wonder where Sprint (which will be the Number Three wireless player if and when the AT&T/T-Mobile deal is approved sometime next year) is going to get the cash, today’s announcement is good news for Clearwire, which has a shaky history for a company so young. First, its executive suite apparently came with a revolving door, with its CEO leaving last month. (See Clearwire Shuffles Executives). And Clearwire’s former CIO, Kevin Hart, last week landed some new initials as CTO at Cox Communications (For more, click here).
In addition, WiMAX is not the global or the U.S. 4G protocol of choice. That nod goes to Long-Term Evolution (LTE), used here by the other three wireless players. As a result, Clearwire wisely is testing LTE in Phoenix.
The settlement also hasn’t helped Clearwire’s stock so far today; at posting time, it was down $0.20 per share.
Girding For Battle
This has not been a good year so far for Sprint. It was dealt an unexpected blow just a day before the opening of the CTIA show last month when AT&T announced it was buying T-Mobile in a deal so stealth that it took everyone, especially Sprint’s Hesse, by surprise. (See AT&T To Acquire T-Mobile USA For $39 Billion and Live From CTIA: Grace Under Pressure).
However, Hesse quickly re-grouped after the news and has since gone on the defensive, vowing to fight the AT&T/T-Mobile merger. The company has hired a bevy of Washington, D.C.-based lobbyists, including Thorsen French Advocacy, Franklin Square Group The Fritts Group. According to Capitol Hill pub Politico, telecom lawyers at Skadden, Arps, Slate, Meagher & Flom also are being consulted.
Pending Deal With LightSquared?
Rumors continue to circulate that Sprint Nextel plans to partner with satellite startup LightSquared (which was one of the media darlings at the CTIA show) for 4G mobile data network sharing. With LightSquared building out a LTE network, this could solve the protocol problem.
However, LightSquared is dealing with allegations its system might interfere with GPS satellite reception that, if true, affects everything from in-vehicle systems like OnStar, to aircraft, to emergency responders.
The National Telecommunications and Information Administration, the U.S. Air Force Space Command and the Department of Homeland Security have said they need more information; and at least one consumer GPS maker said LightSquared’s network definitely will knock out its signal.
Two senators – Pat Roberts (R-Kan.) and Ben Nelson (D-Neb.) – have written a “Dear Colleague” letter, asking the Federal Communications Commission to take a closer look at its waiver allowing LightSquared to broadcast in the L band (1.5 GHz-1.6 GHz).
LightSquared insists its network will cause no mishaps, and its final report to the FCC is due in June.
-Linda Hardesty and Debra Baker