Melissa Frederick, The Examiner
2008-05-08 07:00:00.0
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WASHINGTON -

Analysts were cautiously optimistic about the future of WiMAX broadband service and Sprint Nextel’s stake in it after the company announced a renewed partnership that brings with it $3.2 billion from five new industry partners.

As rumored in The Wall Street Journal yesterday, Sprint announced today it will create a new company with Clearwire to focus on WiMAX, backed by Intel, Google, Time Warner, Comcast and Bright House Networks. The deal is worth a total of $14.5 billion.

Sprint and Clearwire have invested billions in WiMAX, which provides high-speed broadband at a wide-ranging geographic reach, but pulled out of a previously announced partnership last year.

“Even when Sprint and Clearwire called off their partnership some months ago, it was clear that each one independently could not make it alone,” said Jack Gold of J. Gold Associates LLC.

Sprint investors were skittish about WiMAX because it was an unproved technology, according to Derek Kerton, principal analyst for The Kerton Group.

“This has been a complex puzzle to solve,” said Sprint Chief Executive Officer Dan Hesse, noting how Sprint has tried to balance its large investment in WiMAX with concerns about its core wireless business.

Sprint branded its WiMAX network Xohm last year. Spokeswoman Leigh Horner said the new venture will retain rights to the name but still has to decide whether to keep using it. The new company will be called Clearwire.

The joint venture gives cable companies a foothold in next-generation broadband for future bundled service offerings, and Google, which has been campaigning for open access to wireless networks, a stake as well.

“We now have a next-generation wireless network in the making, owned and operated by all the major players in the food chain,” said Gary Purdy, vice president and chief analyst for Frost & Sullivan. “Isn’t this the way wireless networks should have been created in the first place?”

Once WiMAX is operational, it will have to compete with next-generation efforts from AT&T and Verizon, who are working on a noncompatible network called Long Term Evolution.

“Hopefully it won’t be like the Betamax-versus-VHS wars,” said Bill Hold, research director of wireless services for Current Analysis. “But they’ll have a two-year head start on AT&T and Verizon, and we’ll probably see a lot more innovative stuff from Xohm first.”

Shares of Sprint closed at $9.16 Tuesday when news of the possible deal broke, up from $8.72 the day before. The price was $9.16 at closing Wednesday as well.

melissa.frederick@dcexaminer.com