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July 19, 2007

Clearwire signs big pact with Sprint Nextel

Posted by Tricia Duryee at 6:16 AM

Kirkland-based Clearwire, the company founded by wireless entrepreneur Craig McCaw, has partnered up with its rival Sprint Nextel to build a nationwide mobile broadband network using the emerging WiMax technology.

The partnership, announced this morning and outlined in a letter of intent , is expected to be finalized in the next two months. The deal will be subject to review by the Department of Justice.

The two companies said with the partnership they would be able to build the network faster, providing online access to consumers, businesses and even the federal government for public safety use.

Since 2003, Clearwire has been working to build a nationwide network by quietly acquiring airwaves for wireless broadband and raising millions of dollars through private placements, public offerings and debt.

About a year ago, Sprint Nextel also announced its intent to build a nationwide WiMax network. Today, Clearwire is operating a proprietary wireless broadband network in 39 U.S. cities (to about 258,000 customers, which includes networks abroad), and Sprint Nextel expects to get an initial handful of markets by the end of the year.

Both companies have faced skepticism for the role that the new networks will play in the daily lives of consumers and corporate customers, especially as cellphone companies expand their own high-speed networks, called 3G.

"Our companies share a vision of doing for the Internet what cellular and PCS networks did for voice communications starting more than 20 years ago," Clearwire Chief Executive Ben Wolff said. "Based on this shared vision and the expected benefits to each company and our respective shareholders and customers, it is natural that we would work together."

In the deal, Sprint Nextel and Clearwire expect to build out a portion of the nationwide network and enable roaming between their two systems. Sprint Nextel covers the more populated areas, potentially reaching up to 185 million people, or about 75 percent of the population in the 50 largest markets. Clearwire is focusing on areas covering about 115 million people. The two companies expect to be able to cover about 100 million people by the end of next year.

The companies also said today that they will work jointly on product and service evolution, shared infrastructure, branding, marketing and distribution. They also intend to exchange selected airwaves in the 2.5 GHz spectrum band. Spectrum license transfers must be approved by the Federal Communications Commission.

What's interesting is the deal goes fairly deep. The two will market the service under one brand, and Clearwire will be able to bundle 3G service from Sprint Nextel to its customers. The initial partnership is for 20 years with three 10-year renewal periods.

For people familiar with Craig McCaw, Clearwire's founder and chairman, this sounds like another venture he did not too long ago.

When he was reorganizing Nextel Communications into a cellular company, he helped to start Kirkland-based Nextel Partners, a company responsible for rolling out in rural and smaller markets, freeing Nextel Communications to focus on the larger cities.

That idea is not foreign to Sprint, which bought Nextel Communications, and later was obligated to buy the smaller affiliate Nextel Partners. The two-company approach to market -- at least in the case of Nextel -- had a lot of benefits. It allowed Nextel to move faster, while also providing better customer service. It also gave two companies independent access to the public markets.

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Tricia Duryee
Tricia Duryee
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Angel Gonzalez
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Kristi Heim
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