Nov 12, 2007 (Datamonitor via COMTEX) -- S | charts | news | PowerRating -- Clearwire has suffered a huge setback to its plans to build a nationwide WiMAX network in the US after Sprint Nextel pulled out of an agreement made in July to share the infrastructure for a service that would cover 300 million people.
The news, which caused a 20.36% fall in Clearwire share price on Friday to $14.36, was immediately attributed to Sprint's decision last month to part company with its CEO Gary Forsee.
The two companies claimed they could not resolve "complexities" associated with the letter of intent and failed to reach final agreement on the terms of the transaction.
But within the market, the move was attributed to Sprint's determination to cut back on Forsee's capital spending plans in the light of its own poor performance.
Sprint said it is "reviewing its WiMAX business plans and outlook" and would comment further early next year. Originally, it had forecast revenue of $2bn-$2.5bn from WiMAX services by 2010.
Clearwire CEO Ben Wolff said the reason the two companies agreed to work together to accelerate WiMAX deployment still exists. Under the original deal, he said Clearwire and Sprint were precluded from working with other parties, but he said it is now free to seek other partners and is pursuing strategic alternatives.
Under the original plans, Sprint Nextel would focus on areas covering 185 million people, including 75% of in the 50 largest markets, while Clearwire would cover covering 115 million people. By the end of 2008, the two companies expected joint network coverage to extend to 100 million people, with seamless roaming enabled between the deployed areas.
Sprint insisted that it is still committed to developing WiMAX services and is on track for soft launch late this year in the Chicago and Baltimore/Washington markets and commercial launch in 2008. However, while it said it expects to work together with Clearwire, there must be doubts over whether it retains its original ambitions.
Clearwire loss widened from $59.7m to $328.6m in its third quarter on revenue that rose 53.6% to $41.3m. The Kirkland, Washington-based company added 49,000 subscribers in the quarter to increase its subscriber base to 348,000.
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