The merger of Clearwire and Sprint’s Xohm unit, to form the US’ first mobile broadband operator with national spectrum, completed at last, and the entity unveiled a new common brand, Clear. This should have been a day of unmitigated joy for the WiMAX community, for which Sprint and Clearwire have been the highest profile cheerleader, offering apparent proof that WiMAX can support 4G-style services and economics as well as HSPA+ or LTE. But there were two shadows over the closure of the deal ‘ fears over whether the new carrier will be able to stick to its already scaled-back roll-out schedules, and hints that it might not remain faithful to WiMAX forever.
Though upbeat about the $3.2 billion in funding that the merger releases from stakeholders Intel Capital, Google, Time Warner Cable, Comcast and Brighthouse Networks, CEO Ben Wolff admitted in press interviews that the company still requires an additional $2 billion if it is to pursue its aggressive build-out plans unchanged. If the current credit squeeze continues into 2010, and the $2 billion proves hard to raise, Clearwire could be forced to scale back its roadmap, he conceded.
‘If we build more slowly it causes the funding gap to come down,’ Wolff said. ‘We’re competitively in a very good space. I don’t feel like we have to get the company in a situation of needing to raise capital prematurely given this market environment.’
The operator had planned to cover 140 millionn potential subscribers by 2010 by combining the spectrum, resources and costs/risks of Xohm and the original Clearwire to make such a rapid roll-out viable, thereby stealing a march on Verizon Wireless and AT&T, which will only start trialling LTE in 2009 and are unlikely to see wide scale deployments until 2011 or later.
This headstart means a scale-back will not be disastrous, as long as the Clear brand proposition ‘ accompanied by the marketing slogan ‘Let’s Be Clear’ – proves to be appealing in key new markets, and momentum continues to build for mobile internet and open access, the cornerstones of that proposition.
Thus, among all the words of welcome for the new Clearwire, perhaps those that struck the strongest chord came from Craig McCaw ‘ chairman of the new company, founder of the original Clearwire, and legendary wireless entrepreneur. ‘It is a chance to do something right the first time, with simplicity and incredible efficiencies. We are building a wireless broadband network that will stand the test of both time and competition,’ he said. Low risk, efficiency and longevity ‘ a potent mixture for operators that have seen the 3G experience, especially in Europe, where carriers got their complex networks and services right third time (if they were lucky) and then were faced almost immediately with pressure to upgrade again.
The flat network, all-IP economics of WiMAX will be as important to Clearwire’s success or failure as its slogans, services and devices. And if these prove disappointing, Wolff even hinted that, despite its role as the golden child of WiMAX, Clearwire could consider adopting an alternative like LTE in the future. ‘We can’t ignore the fact that many of the operators around the world are talking about deploying LTE,” he said on an analyst call. “In the future, our network vendors will be able to deliver to us equipment that runs both Mobile WiMAX and LTE. If LTE truly becomes a global standard, as WiMAX has, Clearwire will be well positioned to provide LTE’ ‘ though currently, he repeated that the earlier availability of WiMAX gave his company an advantage that it would exploit to the full.
As for the deal itself, most of the details are familiar but some are worth reiterating. Sprint contributes all its 2.5GHz spectrum holdings, giving the new entity over 100MHz of spectrum in most markets, far ahead of any rivals in terms of roll-out of mobile broadband services based on WiMAX or LTE.
‘This is not simply about a time to market advantage, but about having an amazing block of spectrum that is unencumbered by legacy commercial uses and technology,’ said McCaw. ‘This is far and away the most exciting opportunity in wireless I have seen since the beginning of cellular in 1983.”
The investors are Comcast, Intel Capital, Time Warner Cable, Google and Bright House Networks, which between them gain a 22% stake, and the new company will also receive an additional investment of $10 million from Trilogy Equity Partners in the coming months. Sprint keeps a controlling stake of 51%, and the original Clearwire shareholders get 27%.
Although the two key entities have had to operate as separately as possible for legal reasons until the merger was official, many of their joint strategies have become clear, and in addition to Xohm’s launch market in Baltimore, construction is well underway in six other territories – Washington DC, Chicago, Atlanta, Las Vegas, Portland, Oregon and Grand Rapids, Michigan.
The new executive team has already been named, with Clearwire’s current CEO Ben Wolff keeping that job title, and Xohm president Barry West being president and chief network architect. Clearwire’s Perry Satterlee and Scott Richardson remain COO and chief strategy officer respectively, while Xohm senior VP Atish Gude is chief marketing officer.
The company is standing by its promise to be an open access operator, despite the obvious risks of going up against the majors’ HSPA and EV-DO services with no device subsidies. It believes that holding fast to this strategy is essential to convince the market it really is providing a new class of mobile internet experience. Wolff said in a statement: ‘Clearwire is ready to redefine mobile internet services in the US.”