Should Sprint Nextel spin off WiMAX?

Sprint Nextel this week publicly raised the spectre of spinning off Xohm, the WiMAX broadband wireless business being built on its emerging 4G network. Will this present an obstacle for WiMAX in the US...or is an obstacle being lifted?

Consumers' Union just rated Sprint Nextel wireless service at the bottom of the pack, scoring 67% out of 100% in customer survey-based comparison results released today. But believe it or not, that's a 2% gain over last year, and Sprint is treating the news as a positive trend.

It could use a positive trend right about now, especially as speculation abounds over whether the carrier is considering the sale or outsourcing of its 4G network under development. With customers seemingly abandoning Sprint like fans in the second half of a Miami Dolphins game, a possible sale of Xohm -- the WiMAX network it had been developing in cooperation with Clearwire, and is now building on its own -- has become a topic of hot debate among industry analysts.

"We're looking at what's going to be the extent of deployment of WiMAX and Xohm in 2008," said Sprint Nextel's acting CEO, Paul Saleh, speaking this week an the UBS Global Media Conference in New York.

According to Saleh, the now financially struggling telco is contemplating a variety of ways of attracting investment money to WiMAX, including the idea of spinning of its 4G network to investors and then purchasing broadband capacity back from the unit.

Although it's making some headlines this week, the spinoff option is really nothing new, said wireless industry analyst Iain Gillot, the president and founder of iGR, who is all in favor of such a move on Sprint Nextel's part.

"That's been discussed for a while now. He's just confirming that [Sprint] is thinking about it," Gillot told BetaNews.

The original notion behind Sprint's investment in WiMAX was to lay down a broadband network early, and then start reaping the financial benefits a few years down the road, according to the wireless analyst.

"But that's sort of like building a sandcastle on the beach when you know there's a hurricane coming that'll wipe it out," Gillott illustrated. "Right now, they have an existing customer base that's pretty ticked off at them. So it's time they paid more attention to the customer."

While Sprint keeps losing more customers quarter after quarter, rivals AT&T and Verizon Wireless are making big strides.

"I think it'd be a smart move for Sprint Nextel to spin off the broadband wireless now and keep a minority stake of maybe 20 percent," according to the wireless analyst. "That still gives them plenty of room for [WiMAX] in the future."

Avi Greengart, an analyst at Current Analysis Inc., aptly summed up the pros and cons of Sprint's staying in the WiMAX business as opposed to exiting the market altogether.

"The core business [of Sprint Nextel] is suffering, with AT&T and Verizon picking up more subscribers," Greengart said. "But on the other hand, Sprint Nextel's broadband assets give them a strategic investment."

Also at the investors conference in New York, Saleh made mention of Sprint Nextel's announcement on November 9 about the termination of talks with Clearwire around a WiMax deal inked last July. According to Saleh, the company's Clearwire decision has often been misunderstood because of its "complex" nature.

Meanwhile, in a related competitive threat to Sprint Nextel, Verizon Wireless has decided to throw its hat in the ring with LTE, an alternative to WiMAX in the 4G wireless field.