First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.
Sprint's solo LTE plan ignores Clearwire assets
- — 08 October, 2011 10:32
Shares of Sprint Nextel and Clearwire plummeted on Friday after Sprint laid out plans to build its own LTE network, leaving the ailing Clearwire alone to fund and build LTE itself.
At an event in New York, Sprint said it was building an LTE (Long-Term Evolution) high-speed mobile data network that would launch commercially in the middle of next year and reach about 250 million U.S. residents by early 2014. The LTE service would use the flexible network that Sprint plans to build with Ericsson under its Network Vision initiative. Sprint has said the initiative will cost US$4 billion to $5 billion and it will have to raise additional funds at some point.
But the plan had no place for Clearwire, which currently provides the 4G service for Sprint subscribers over its WiMax network. Sprint bypassed Clearwire even though it owns a majority of the company, which was formed as a joint venture in 2008.
Clearwire's stock (Nasdaq: CLWR) plunged $0.66, or 32 percent, to hit $1.39 by the end of the day Friday. Sprint (NYSE: S) didn't fare much better, losing $0.60, or nearly 20 percent, hitting $2.41.
Clearwire sells WiMax under its own brand and through cable operators, but Sprint is by far its biggest customer and also provides the 3G service that is critical for all users of the WiMax network to enjoy broad national coverage. Sprint said Friday that it will keep to a wholesale deal the companies reached earlier this year, under which Sprint will pay Clearwire $1 billion through the end of 2012 for access to WiMax. The company will also keep selling WiMax devices through next year and support them even longer. But Sprint made no further commitments to Clearwire.
Without Sprint, Clearwire could be in a precarious position, said analyst Monica Paolini of Senza Fili Consulting. When Clearwire announced its own LTE plans earlier this year, the company said it would need to raise $600 million to build the LTE network alongside its WiMax system.
"Clearwire can't go and market LTE without having a cell network or a strong partner," Paolini said. Analysts at the New York event challenged Sprint over the possibility of a Clearwire bankruptcy, to which CEO Dan Hesse said no wireless bankruptcy has ever left paying customers without service.
Clearwire defended its own prospects.
"Sprint remains dependent on Clearwire for 4G and nothing about today's announcement changes that," Clearwire said in a statement Friday. "Even with their re-allocation of existing spectrum, it's obvious that their spectrum resources are insufficient to meet the long-term demands of mobile data, but this is not unique to Sprint. Data capacity will clearly stress the capabilities of the low-capacity 4G deployments of other carriers due to their spectrum constraints."
For Sprint's part, the Network Vision project is impressive technologically, but it will cost far more than adding LTE to Clearwire's network and expanding its reach, Paolini said. "It doesn't make sense to have two networks," she said.
More notable yet is the fact that Clearwire has a huge amount of radio spectrum, exceeding 100MHz in most cities, yet Sprint plans to deploy LTE using the frequencies it already uses for its 3G and 2G networks. The Network Vision technology is designed for doing this gradually through software changes.
If the 3G network isn't being used to capacity now, Sprint may be able to move LTE into that band without affecting the experience of 3G customers, Paolini said. "They might have some more room to do this," she said. But it could leave Sprint with less spectrum than other major carriers have for LTE, she added. Sprint said it could gain access to some more spectrum through LightSquared, the hybrid satellite-LTE carrier that plans to run its service on Network Vision. LightSquared has yet to gain FCC approval to operate.
It's nothing new for the two companies to be out of sync. Before reaching the wholesale deal announced in April, they negotiated for months over how Sprint should compensate Clearwire for its subscribers' use of the WiMax network. And before the joint venture was even formed between Sprint and the original Clearwire, a fixed wireless broadband provider, they reached one tentative deal in 2007 that fell apart within months.
"The underlying motives are just as confused as ever," Paolini said.
One possibility is that Sprint is letting Clearwire's situation grow even more dire so it can buy out the rest of the venture at a favorable price, she said. If that is its plan, the fallout from Friday's announcement may represent progress.