Mobile WiMAX – it’s not a sprint, it’s a marathon. Or, as developments this week would suggest, it’s not a Sprint, it’s a Clearwire. Sprint Nextel’s plans for a nationwide mobile WiMAX network in the US have stalled more than once, not least because of the carrier’s failure to sustain its relationship with wireless broadband provider Clearwire.

May 9, 2008

9 Min Read
Roll up, roll up, roll out

By The Informer

Mobile WiMAX – it’s not a sprint, it’s a marathon. Or, as developments this week would suggest, it’s not a Sprint, it’s a Clearwire. Sprint Nextel’s plans for a nationwide mobile WiMAX network in the US have stalled more than once, not least because of the carrier’s failure to sustain its relationship with wireless broadband provider Clearwire.

But the firm is clearly of the belief that there is safety in numbers, not to mention an awful lot of money. Sprint has persuaded a bunch of other firms – Intel and Google among them, as well as cable providers Comcast, Time Warner Cable and Bright House Networks – to buy into the dream, like some multi-billion dollar version of Dragon’s Den. The new company will carry the Clearwire name and also use the Xohm brand that Sprint developed for its WiMAX operation.

Whether this is letting friends in on a score or simply evidence of the old adage that misery loves company we’ll have to wait and see. Either way, Sprint has turned over 49 per cent of the operation to other investors, retaining 51 per cent for itself. Existing Clearwire shareholders will get 27 per cent, while the newcomers are getting the remaining 22 per cent for a collective investment of $3.2bn.

Individual investments are as follows: Comcast is topping out the fund with $1.05bn, hotly pursued by Intel Capital with $1bn. Time Warner Cable is carving itself a $550m slice, just ahead of Google with £500m, while Bright House is bringing up the rear with $100m.

But the money’s not just buying a share in the business. For its half a billion, Google’s got its feet well under the table, as preferred provider of internet applications to both Clearwire and Sprint, while also finding a guaranteed home for its Android handset platform. The cable guys have sorted themselves 3G and 4G wholesale agreements – a clear defensive play as cellular carriers look to position their services as the only kind of broadband you need – and Intel will be pushing Clearwire’s services in association with its notebooks. Everyone’s a winner…

Well, if the technology works. And assuming, of course, that juggling such a diverse gaggle of stakeholders – each with specific demands that they will seek to prioritise within the operation – will be easy. The Informer rather suspects that it won’t. And if it turns out not to be, the additional funding that this coalition has provided may simply turn out to be a stick with which Sprint gets soundly beaten.

This is all happening against a backdrop of speculation and difficulty for the carrier. Earlier this week, one of Sprint’s largest wholesale customers, Qwest, took its business – and its 816,000 subscribers – over to Verizon and there have been suggestions in the US press that Sprint should and may be looking to offload Nextel, for which it paid $35bn in 2005.

As if this all wasn’t enough, German magazine Der Spiegel this week reported that Deutsche Telekom is looking at buying Sprint Nextel as a means to improve its own position in the US market as it plugs away against Verizon and AT&T. DT’s T-Mobile is some way behind the other leading US players – only this week switching on very limited 3G coverage – and such an acquisition would make it the largest mobile player in the States by some distance. But think about it: A US GSM/WCDMA carrier buying a CDMA player with a half stake in a complicated, multi-sector-owned mobile WiMAX operation and an iDEN gig on the side? It’s going to be tricky to wring much synergy out of that lot.

There was another transatlantic M&A development this week, with UK-headquartered retailer and service provider Carphone Warehouse announcing the sale of 50 per cent of its European and US interests to stateside consumer electronics retailer Best Buy for £1.1bn. Part of the deal will see Best Buy use its share of CPW’s European retail presence to establish a consumer electronics foothold. So Carphone Warehouse could soon be selling TVs and the like.

The UK retailer will contribute its 2,400 European stores as well as its share of its existing relationships with Best Buy. Under the agreement, Carphone Warehouse and Best Buy will each own 50 per cent of the retail business, comprising all the 2,400 stores, the web and direct businesses, the insurance operations, and airtime reselling businesses. Carphone will maintain 100 per cent control of its fixed line telecoms business in the UK, comprising TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.

Charles Dunstone, Carphone’s CEO, said, “Best Buy brings demonstrable expertise in merchandising, sourcing and customer service: that should help us accelerate the evolution of our business towards the broader connectivity market. We bring local knowledge, infrastructure and the expertise in linking services to product: that should help them push into larger format consumer electronics retailing in Europe.”

Dunstone said his company plans to use the proceeds of the deal to pay down debt, invest in broadband customer growth and infrastructure, and invest in new areas of growth.

In other international investment news, Indian carrier Bharti has long harboured a desire to take its highly regarded operational expertise on a long holiday overseas. This week the firm confirmed that it is in discussions with South African-headquartered MTN over an acquisition that could be worth $17bn and would create a powerful international player. It stressed that the talks remain at an early stage.

As the largest operator spanning the Middle East and Africa, MTN is something of an obvious target for major investors looking to increase their presence in high growth emerging markets. MTN had a total subscription base of 68.2 million at the end of the first quarter, with operations in 21 countries. The carrier is 76.9 per cent publicly traded on the Johannesburg Stock Exchange, so Bharti would have to make an offer to institutional and private investors to acquire a majority stake in the company.

MTN’s $5.5bn acquisition of Investcom in 2006 expanded its footprint outside South Africa, but many of the markets in which it operates have relatively low penetration rates, making it a prime candidate for an acquisition approach.

There is a major shift underway, the Informer reckons, in the global operator community’s balance of power. Carriers in high growth markets are building impressive scale and looking to export their expertise. You can read all about this in the May edition of Mobile Communications International.

Back in the UK, BT this week unveiled its Broadband Anywhere package, which adds an HTC s620 – branded as the BT ToGo – to the fixed line broadband/wireless router connection. Punters can get 50 minutes of mobile talktime and 50 texts (courtesy of BT’s MVNO relationship with Vodafone) for £5 extra or 600 minutes and 700 texts for £35 extra.

The bundles include unlimited wifi browsing, but there’s a 10MB per month data download on the cellular use. Given that the fastest network technology available on the mobile side is GPRS, this should be ok. Because on a GPRS connection, it will probably take users a month to download 10MB anyway. The Informer can’t understand why there’s no 3G option on this, because not even the GSMA would try and pass off GPRS as broadband.

BT should have a peek at what Mobilkom Austria’s been up to. This week the carrier claimed – in conjunction with Nokia Siemens Networks – to have undertaken the world’s fastest HSPA data call. During the trial, the firms said, the downlink peaked at 10.1Mbps. Which is pretty nippy.

Meanwhile, Nordic/Baltic carrier TeliaSonera – recently the focus of acquisitive attentions from Orange – Norwegian competitor Telenor and Hutchison’s 3 have all won 4G licences in Sweden, where the beauty contest award concluded this week. Never mind your 10Mbps – these guys are talking about 100Mbps. That’s broadband, BT. Capiche?

Still, to be fair on BT, Apple didn’t deem it necessary to launch its iPhone with 3G (although it did have EDGE at least). This week Vodafone – conspicuous by its absence from the first wave of Apple’s distribution partners, announced that it has secured supply rights for the handset in 14 of its markets. Details on timings are yet to appear, but Voda will be flogging the iPhone in Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey. The UK and Germany won’t see Vodafone offering the handset, presumably because of exclusivity deals that Apple has with O2 and T-Mobile respectively.

It strikes the Informer as likely that Vodafone won’t be offering the current iteration of the device, given that the carrier has always had issues with the absence of 3G connectivity. Last September, the Informer spoke to Jens Schulte Bockum, Vodafone Group’s global director of terminals. While he heaped praise on the handset in terms of its interface and design, here’s what he had to say on its connectivity:

“We think the fact that the current iPhone is not supporting HSDPA or 3G broadband is a serious omission. Whether you use an EDGE network of GPRS, the 2G internet experience from the iPhone doesn’t really leverage the intrinsic device capabilities from a browser perspective. It is not as compelling as one would have thought it could be. Especially if you benchmark it against the wifi experience.”

The iPhone is popular with the youth, of course. And it seems these days that if you want to connect with the youth, you have to meet them on their own territory. So it emerged this week that His Holiness the Pope will be using text messages to contact young Catholics when he attends World Youth Day in Australia later this year. Perhaps something along the lines of: ‘U W8 til ur married :o(’

Benedict XVI will be marshalling a range of youth-oriented technologies to spread the word to the youngsters, including digital prayer walls and a special social networking site, a bit like a Catholic Facebook. The latter, presumably, will see users being ‘poped’.

It is a fact that his namesake, the actor Dirk Benedict, who didn’t do so badly communicating with the kids himself, through his roles as Face in the A-Team and Starbuck in Battlestar Galactica, lit on his stage name while he and his agent were in a restaurant trying to decide what to have for breakfast. On seeing Eggs Benedict, the decision was made.

The Informer can’t help but wonder if the Pope, likewise, chose his own handle by scanning the Vatican brunch menu. It must have been a tough call but, in the end, Pope Pancakes probably wouldn’t have worked. (With Papal syrup? Ed.)

Take care,

The Informer

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