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Sprint Nextel to form network with WiMax

Sprint Nextel said it will use an emerging technology called WiMax to build a new high-speed wireless network.
/ Source: The Associated Press

Sprint Nextel Corp., the nation's third-largest cellular provider, said Tuesday it will use an emerging technology called WiMax to build a new high-speed wireless network.

The company said the new network, expected to launch in some markets by late 2007, will provide customers with wireless Internet speeds on par with DSL and cable TV modems and four times faster than speeds available on current wireless networks.

Gary Forsee, Sprint's chief executive, said during a teleconference that Intel Corp. will be supplying equipment to build the network while Motorola Inc. and Samsung Telecommunications America will develop WiMax-compatible phones and mobile devices.

Sprint expects to spend about $1 billion on the initiative in 2007, and between $1.5 billion and $2 billion in 2008.  Forsee didn't specify to what extent the other companies might help offset Sprint's costs, saying those details will come later this year when Sprint provides financial guidance for 2007.

The costly initiative was announced less than a week after the company, formed last summer by the merger of Sprint and Nextel Communications, reported a 38 percent drop in second-quarter profit.

The earnings report, which depicted a company struggling to attract and retain subscribers, sent Sprint Nextel's shares to a 52-week low.  That slide continued Tuesday, with the stock sinking 31 cents a share, or 1.8 percent, to close at a new 52-week low of $16.63 on the New York Stock Exchange.

The WiMax plan also comes as Sprint is still rolling out its third-generation cellular data network, which just last week the company said it planned to upgrade starting at the end of 2006.

The new WiMax network would provide download speeds of between 2 megabits per second and 4 mbps. T hat's in the same range as today's typical broadband offerings over phone and cable wires, but considerably slower than the speeds those providers are starting to offer as they upgrade their networks.

Forsee said he expected WiMax services also would be sold through the company's new partnership with the nation's four largest cable companies, which plan to begin selling Sprint cell service this year.

"They've been very much aware and involved in our 4G plans," he said, using the shorthand for fourth-generation wireless technology.  Other partners may join the venture as well, he said.

WiMax has been touted as a "next big thing" in wireless technology for several years, but actual deployments around the world have mostly been limited to small trials rather than full-blown network launches.  Though derived from the same technology as the popular Wi-Fi standard that provides wireless Internet access in such places as airports and coffee shops, a WiMax signal can blanket a much wider coverage area.

Sean Maloney, executive vice president for Intel, said Sprint's involvement could drastically increase the technology's adoption.  "Ethernet created business computing," Maloney said. "Wi-Fi has changed all sorts of things. What we believe here is that a single high-speed wireless standard all around the planet is going to change everything again."

The network will take advantage of Sprint's extensive holdings of 2.5-gigahertz bandwidth spectrum covering 85 percent of the nation's 100 largest cities.

Sprint officials said they chose WiMax after evaluating several other potential technologies, including those developed by Qualcomm Inc. and IPWireless.  They said WiMax was superior in terms of speed, cost and compatibility with its spectrum.

WiMax also is not tied to any one company, meaning Sprint can negotiate with a wider range of suppliers for equipment and services.

Analysts were largely supportive of Sprint's choice of WiMax, but said it's a big gamble to invest heavily in a network aimed at data services, which still represents a small percentage of wireless revenues.

"We are concerned that Sprint Nextel may find itself on the bleeding edge, rather than the leading edge, of this 4G network build, given our cautious stance regarding consumer demand, and that positive (returns on investment) may not be seen anytime in the near future," wrote Stifel Nicolaus analyst Christopher King in a research note.

Charles Golvin of Forrester Research was a little more optimistic.  "I think what Sprint is betting on is that consumers are increasingly going to rely on the service they get at home for Internet to be on their mobile devices," he said.

Forsee said Sprint is committed to upgrading the current network but needed to make a decision on the next generation to keep its competitive edge.  He estimated the company's bandwidth gave it a 12- to 14-month head start on rivals.

He also dismissed concerns that investors have not always rewarded companies that make major investments in new technology, such as Verizon Communications Inc., which has been hammered for building a vast fiber-optic network to deliver video programming.

"If we were to squander our speed-to-market advantage, that would be a terrible decision to make," he said.