Sprint's core postpaid business has been gradually shrinking as seen by a net loss of approximately 3 million customers during the first nine months of 2009. They have increasingly been focused on the prepaid market with recent success in their $50 monthly unlimited prepaid rate plan. Their subsidiary, Boost Mobile offers prepaid services to nearly 6 million customers in the United States. Their recent acquisition of Virgin Mobile this summer for $483 million provides Sprint another 5 million prepaid customers. Let's not forget their other 48 million subscribers. Sprint has about $20 billion in debt, 2.8 billion shares outstanding and with the recent price of $4.00/share; Google could pick up the company for a 25% premium. This would only be about $14 billion in Google stock with Google assuming their debt. At Google's share price, that's only 7% of their outstanding shares. (See Exxon's recent acquisition of XTO, all stock deal of $31 billion). Google would have the spectrum, WiMax/4G, and access to Sprint's R&D. This is the fastest way they can become a carrier. The open Android OS would still be available to other handset manufacturers and market acceptance would be a result of who creates the better user experience.
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The Wall Street Journal reported today that Sprint-Nextel and Clearwire are abandoning their plans for a nationwide WiMax network that would have reached 100 million people by the end of 2008. The departure of Sprint's CEO, Gary Forsee presumably complicated the closing of the transaction. This is a real blow to the burgeoning ecosystem being created around WiMax. There were great expectations from the recent WiMax Forum with regards to Sprint's Xohm service that was expected to be available in mid-2008. Perhaps Sprint's investors want to see them improve their overall revenue picture before launching down a $3 billion+ CAPEX road. This is a major setback to Craig McCaw's Clearwire. One option under consideration was a spinoff of Sprint's WiMax business and merging it with Clearwire. I'm not sure Clearwire can make it on its own because estimates of infrastructure build out costs continue to increase (from $600M to over $1 billion). Sprint also has been working to get things going with Google, although nothing has been launched. Sprint is without a leader and clearly that affects their ability to get strategic deals completed. Don't be surprised if other companies in the supply chain come with investment money to help Clearwire survive - Intel, Motorola and Samsung to name a few. The shakeup of the weak WiMax players is well underway.
Sprint has announced progress with their mobile WiMAX initiative, Xohm, saying they will have the service available in select cities by Q2'2008. The company is enthusiastic about laptop and tablet PC manufacturers claiming they will have embedded Mobile WiMAX in their next generation machines. Sprint has placed a big bet with WiMax. Despite marketing efforts by Intel and the WiMax Forum, the spectral efficiency and overhead signaling in 802.16e-2005 has disadvantages compared with 4G standards, LTE (Long-Term Evolution) and UMB (Ultra Mobile Broadband).
Improvements in standards are all about spectral efficiency. The 3G and 4G debate places LTE as leading with WiMAX and UMB competing for second place. 4G is characterized by larger channels (up to 20MHz) and uses the popular OFDM modulation scheme. GSM and WCDMA carriers will follow the 3GPP (Third Generation Partnership Project) path to LTE as the 4G standard. UMTS is the dominant 3G standard and now with improvements brought with HSDPA (High Speed Downlink Packet Access) and even HSUPA (uplink), we actually see good broadband performance in the wireless wide area network. The second 3G standard is CDMA EvDO (used by Verizon in the U.S.).
What is confusing for WiMax is that the IEEE is already working on improving the standard called, "IEEE 802.16m," due to be ready by 2010. No one knows if this will be backward compatible with today's WiMax implementations. The advantage of UMB is it is backward compatible with CDMA systems even though there is a dependency on a single supplier of chips - Qualcomm. With WiMax-802.16e becoming commercially available in 2008 and Intel's delivery of chips in laptops; it has a strong head start. Intel was instrumental in establishing the explosion of 802.11 WiFi networking. The big difference here is you are dealing with licensed spectrum where the stakes are much higher than merely establishing a de-facto standard such as WiFi. As Peter Gabriel says, "Too much at stake, ground beneath me shake; and the news is breaking." I hope the monkey doesn't get hurt.