It may have taken a bit longer than expected, but Sprint Nextel and Clearwire are expected to pull the trigger on a long-awaited wireless broadband joint venture on Wednesday, fueled in part by a $3.1 billion investment by a handful of cable operators, Intel and Google.
The new joint venture, to be called Clearwire, was expected to be unveiled back in April, during the CTIA Wireless show in Las Vegas. But according to an executive familiar with the deal, the parties have reached an agreement and are expected to formally announce the venture as early as Wednesday.
The JV was first reported by the Wall Street Journal on Tuesday.
According to the executive familiar with the deal, the JV will include cable operators Comcast, Time Warner Cable and Bright House Networks, semiconductor giant Intel and Internet search leader Google. According to the executive, Comcast will contribute $1.05 billion, TWC $550 million and Bright House $100 million to the venture.
Intel will pony up $1 billion in cash and Google will contribute about $500 million, the executive familiar with the deal said. Sprint and Clearwire will contribute their broadband spectrum and equipment. All in, the executive said the venture will be valued at about $12 billion.
The deal comes shortly after the cable companies shuttered another wireless joint venture with Sprint, called Pivot, that was supposed to provide cable operators with a wireless telephony product. That JV, announced in 2005, went through several months of trials but never managed to get off the ground.
But the executive familiar with the Clearwire deal insisted that the new agreement is vastly different than the ill-fated Pivot.
“That [Pivot] was primarily a phone product, a joint venture in which they all had to march in one direction in terms of what the product was and pricing. “This [Clearwire] is going to be completely different,” the executive said, adding that each operator will determine on its own how the product will be priced, branded, and when and where each rollout will take place.
Sprint and Clearwire will use the funding from the JV partners to build out a Wi-Max network that could offer both 4G wireless telephony as well as wireless broadband service capable of handling Internet and multimedia traffic at speeds up to eight times faster than what is currently available.
Back in July 2007 Sprint and Clearwire announced plans to build a nationwide Wi-Max network, but scuttled the deal in November of that year because they couldn’t come to terms. However, the two companies did not abandon plans for the network, and began to seek outside funding for the build out.
While it was unclear just how long it would take to complete the new Wi-Max network, the executive familiar with the deal said that it would give the JV at least a two-year jump on telcos like AT&T and Verizon Communications. Both Verizon and AT&T have said it would take between three to five years to build their own Wi-Max services.
But the executive stressed the investment by the cable companies in the JV is just that—an investment. It does not mean that a cable Wi-Max product is inevitable.
The executive said Wi-Max is still an evolving technology and, though it appears there is a demand for high-speed wireless service, its viability will be determined by the market.
“They will make a decision if they think this is what the customer wants,” the executive said. “Right now they are seeing a demand and they think there will be a demand in the future. This is a way to meet that demand in the future.”