WiMAX Future Looks Cloudier as Sprint, Clearwire Call It Off
In a further indication that the business model for WiMAX service in the United States has yet to materialize, Sprint Nextel and broadband service provider Clearwire - the latest venture to be founded by wireless telecom pioneer Craig McCaw - have called off their joint project, announced just last July, to roll out WiMAX service throughout the US.
The strange Xohm brand (pronounced "zoam," rhyming with "foam") will continue, although Sprint is now writing it as a word and not a false acronym ("XOHM"). And Sprint's ongoing project to roll out WiMAX service to the Baltimore/Washington and Chicago markets will apparently continue, as those projects were already well under way before the partnership ever took root.
From there, it isn't exactly clear what Sprint intends to do. It won't start "rolling down" WiMAX as some have pondered, according to its statement this morning, and has commitments to keep with handset providers Nokia, Motorola, and Samsung, and WiMAX technology champion Intel. Afterwards, though, it's a mystery, as the company said it is "reviewing its WiMAX business plans and outlook."
The original plan was for Sprint to provide WiMAX service to 70 million customers in its shared network, with Clearwire providing the other 30 million. Clearwire currently provides broadband service to 44 cities in 16 states, but typically to mid-sized towns such as Corpus Christi, Texas; Nashville, Tennessee; Eau Claire, Wisconsin; and Modesto, California.
Whereas many are looking to Sprint's ad hoc reorganization - which began with the ouster of CEO Gary Forsee last month - as the impetus behind the company's sudden reticence, another factor that's as clear as a copper wire in bright sunlight could be Clearwire's performance. Just this morning, with timing that cannot possibly be coincidental, Clearwire reported a $119.8 million loss for its previous fiscal quarter, versus only a $33.4 million loss in the same quarter of last year.
Revenues aren't the problem - they're actually up 217%, and no, there's no missing decimal point there. But charges for bonds on its outstanding debt crippled this last quarter, and may have presented Sprint with some big question marks over whether its partner could meet its commitment in the coming years.
At least one option is off the table: Once again, The Wall Street Journal was flat wrong about a major business story. Sprint did not sell its entire WiMAX operation to Clearwire, and probably could not have ever done so, given the evidence of Clearwire's financial hemorrhaging revealed this morning. While the move might have helped Sprint in the short-term revenue department, the money to float the deal would have to have come from somewhere...certainly not Clearwire's creditors.
It will be next year, Sprint says, before it's ready to announce whether it plans to scale down its customer projections for its Xohm WiMAX service by 30%, or perhaps greater.