With news that Sprint (NYSE: S) Nextel and Clearwire (NSDQ: CLWR) may soon announce a joint venture funded by a cross-section of cable, Internet and chip companies, the next obvious question is: will it be successful? If you look at the companies’ track records, the obvious answer is no. It was about a year ago that Sprint Nextel and Clearwire announced a potential deal between the two companies that would enable them to co-develop and sell a nationwide WiMax wireless broadband network. But after months of negotiations, the deal was scraped. Likewise, a deal between Sprint Nextel and a number of cable operators, called Pivot, just failed after it became too complicated. Lots more after the jump…
However, perhaps the third time will be the charm. There’s a number of reasons for the seven-way partnership to work — most of which revolve around how they absolutely need each other to be successful. So far, the market is repsonding favorably with both Clearwire and Sprint trading up in after-hours. Here’s those reasons:
– WiMax was starting to lose the publicity battle to a competing technology called LTE. Although it is still in early development, heavy-hitters like Vodafone (NYSE: VOD), Verizon (NYSE: VZ), AT&T (NYSE: T) and T-Mobile have come out in favor of it.
– Sprint Nextel is in the middle of a turnaround and it doesn’t need the additional distraction of building a fledgling new network. On the other hand, Clearwire needs the cash to continue its aggressive build-out plans.
– The cable operators wanted a way into wireless without having to make the risky bet all on their own.
– Google (NSDQ: GOOG) wants influence over a wireless network, so that it call easily offer its applications to consumers.
– Bandwidth is one of the big issues in WiMax. If you offer a bigger pipe to consumers, then that information needs a bigger pipe on its way back to the Internet (called back haul). Sprint has been facing issues with this in its WiMax trials. That’s where the cable operators, like Comcast (NSDQ: CMCSA) and Time Warner (NYSE: TWX) may be able to help out. Cable operators have a huge landline network that may have excess capacity on it that can be used for back haul. In addition, Google has been noted for buying up dark fiber around the U.S. — that may be of some use if it’s offered to the JV.