Sprint, Clearwire Form New WiMAX Company

Clearwire Corp. and Sprint-Nextel Corp. are combining their WiMAX efforts to form a new $14.5 billion company, the two announced on Wednesday. They also said the new company would have 3G and 4G wholesale agreements with cablecos to bundle in Sprint’s wireless services. For in-depth analysis on the implications of this deal, read Spinoff Gives Sprint, WiMAX a Second Wind.

The new company will be called Clearwire, and will take a $3.2 billion collective investment from Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks.

Assuming $20 per share, Sprint will own the largest stake, with an approximately 51 percent equity ownership; Clearwire shareholders will own around 27 percent and the new strategic investors, as a group, will acquire 22 percent.

“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,” said Craig McCaw, chairman at Clearwire, in a statement. “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.”

Clearwire CEO Ben Wolff called it a “once-in-a-lifetime opportunity.”

“Given the complexity of this transaction, we have taken the time and effort to do it right, by thoughtfully leveraging the resources and opportunities that we and our investors are bringing to the table,” Wolff said. “This transaction is tremendous news for the entire Clearwire team – our shareholders, our customers and our employee-partners, and we look forward to partnering with the talented team from XOHM to achieve our shared vision.”

The new Clearwire expects to offer mobile wireless Internet services on an array of new devices. Service will be made possible by integrated WiMAX chipsets, scalable operating expenses and a commitment to an open architecture.

Mobile WiMAX is a standards-based wireless broadband technology designed to operate multiple times faster than today’s 3G wireless networks. With embedded WiMAX chipsets in laptops, phones, PDAs, mobile Internet devices and consumer electronic equipment, mobile WiMAX technology is expected to allow users to wirelessly access multimedia applications, such as live videoconferencing, recorded video, games, large data files and more – anywhere in the network coverage area.

The transaction is expected to be completed during the fourth quarter of 2008. The management team will be led by Wolff, who will be CEO of the new Clearwire, and Barry West, Sprint’s CTO and XOHM business unit leader. He will be president of the new Clearwire.

The new Clearwire is targeting a network deployment that will cover between 120 million and 140 million people in the U.S. by the end of 2010.

In addition to spectrum, Sprint will contribute to the new Clearwire certain hardware, software and all of its WiMAX-based trademarks and other WiMAX-related intellectual property, and will put all of its 2.5 GHz spectrum and its WiMAX-related assets into a subsidiary of the new company.

New commercial relationships include:

• Intel will work with manufacturers to embed WiMAX chips into Intel Centrino 2 processor technology-based laptops and other Intel-based mobile Internet devices, and will market the new company’s service in association with Intel’s performance notebook PC brand.

• Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product.

• 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.

• 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, but have no current plans to do so.

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