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November 9, 2007

Sprint Nextel severs ties with Clearwire

Posted by Tricia Duryee at 7:50 AM

I was expecting an update during Clearwire's third-quarter earnings conference call this morning on its partnership with Sprint Nextel to jointly build out a nationwide network.

But it came earlier than the 8 a.m. call.

In today's paper, we reported that the rumors were circulating that the partnership had ended. Sprint Nextel has come under increasing fire for having bad performance on its cellular networks -- and some investors find its upcoming WiMax business a distraction.

In Sprint's quarterly filing with the SEC filed early this morning it read:

"We recently agreed with Clearwire Corporation to terminate the non-binding letter of intent signed by us and Clearwire in July 2007 that provided, among other things, for the joint construction of a nationwide broadband network based on WiMAX technology."

The "other things" included access to Sprint's cellular network. That would have been valuable in providing a triple play (voice, TV, Internet). It would have also helped in branding efforts.

Clearwire's stock is falling, and is down about 20 percent based on the news. Here's the story from the AP.

In Clearwire's third-quarter press release, the company was slightly more optimistic, saying discussions with Sprint continue, but no partnership is guaranteed.

"Clearwire and Sprint Nextel continue their discussions regarding how best to collaborate for the deployment of a nationwide mobile WiMAX network. Over the course of the parties' discussions, Clearwire and Sprint concluded that the joint build transaction originally contemplated by the previously announced letter of intent was likely to introduce a level of additional complexity to each party's business that would be inconsistent with each company's focus on simplicity and the customer experience. Consequently, the parties have agreed to terminate their obligations under the letter of intent, although discussions continue regarding the best means to accomplish the benefits that were expected under the letter of intent. Notwithstanding the ongoing discussions, there can be no assurance that a transaction or agreement between Clearwire and Sprint Nextel will be concluded."

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Tricia Duryee
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