Sprint Nextel and Clearwire plan to make their future LTE networks work together and are working on a commercial agreement under which Sprint would use Clearwire's network for extra capacity.
Sprint CEO Dan Hesse disclosed the non-binding memorandum of understanding (MOU) during a conference call on Wednesday to discuss Sprint's third-quarter financial results. The news cleared up some of the uncertainty around Sprint's relationship with Clearwire, which provides Sprint's 4G services today through its WiMax network. At an analyst conference on Oct. 7, Sprint had described plans for its own LTE network but said little about its future relationship with Clearwire.
If Sprint and Clearwire can work out the engineering details and reach a business deal, Sprint would probably start buying LTE capacity from Clearwire in 2013 to augment its own network, Sprint said. Sprint's own network is set to launch commercially in the middle of next year and be mostly complete by the end of 2013.
Although Sprint owns a majority of Clearwire's shares, the two companies announced plans for their next-generation networks separately. Clearwire said in August it would add LTE to its WiMax network but was still seeking funding for the US$600 million project. Some observers were concerned that Sprint seemed to be bypassing a valuable partner in Clearwire, which has some of the strongest radio spectrum holdings in the U.S.
Because of differences in their spectrum, Sprint and Clearwire plan to use different types of LTE networks. Sprint will use FD-LTE (frequency-division), which transmits and receives signals over different frequencies, while Clearwire will use TD-LTE (time-division), which transmits and receives over the same frequencies.
Under the MOU, the two service providers have agreed to cooperate on smooth handoffs between their future networks, chips to be used in devices, sites and timing for building base stations, and other details, Hesse said. They are still discussing a business arrangement for Sprint to make use of Clearwire's network and will give further details after that deal is finished, he said.
"We're making very good progress, we believe, on the technical front with Clearwire," Hesse said.
Sprint hopes to better manage its fixed network costs by offloading data traffic to Clearwire's network, which has significant capacity for growth because Clearwire holds an average of more than 100MHz of spectrum in markets across the U.S. Larger bands of spectrum allow for greater speed or capacity on a network.
Sprint plans to launch its LTE network in the middle of next year and run it partly on spectrum repurposed from its 3G data network. LTE will be part of Sprint's Network Vision infrastructure, a flexible network designed to accommodate multiple mobile technologies and frequencies. The company already has a $9 billion deal with hybrid satellite-LTE startup LightSquared that would give Sprint access to additional LTE capacity.
Sprint still plans to carry out the LightSquared deal if the FCC allows that company to build its network, Hesse said. Sprint has estimated the LightSquared deal would allow it to meet capacity needs for an additional year without having to build more capacity of its own. Working with Clearwire could give it multiple years beyond that, Hesse said.
Clearwire was formed in 2008 as a joint venture among Sprint, Google and several cable operators, including Comcast and Time Warner Cable. It built out the first national 4G network in the U.S. using WiMax, which predated LTE but has now taken a backseat to the newer technology in terms of global adoption by mobile operators.
Sprint is Clearwire's largest customer by far, reselling capacity on its network to subscribers who buy 4G devices such as its Evo and Epic smartphones. Under a deal announced on April 19, Sprint is set to pay Clearwire about $1 billion for WiMax service through the end of 2012.
But relations between the two companies have not always been warm. They spent months working out the April reimbursement deal, and Sprint has relinquished its majority vote on Clearwire's board out of concern over possible liability if Clearwire were to default on loans.