Sprint to Shed WiMAX, Build its Own LTE Network for 4G

Is this the beginning of the end for WiMAX provider Clearwire? Things certainly got dimmer for the nascent national broadband provider Friday when Sprint revealed its new Network Vision strategy that in part calls for Sprint to switch from using Clearwire’s WiMAX to power its 4G network to a Long Term Evolution (LTE) network that Sprint will build itself, scheduled to launch sometime next year.

Though Sprint said it will continue to support current WiMAX devices running on Clearwire’s network through the end of 2012, the decision to move completely to LTE and to basically abandon Clearwire — a company that Sprint owns 54 percent of — left many observers scratching their heads Friday. The most curious part of the move to many was Sprint’s apparent willingness to walk away from the huge spectrum position controlled by Clearwire in favor of repurposing several smaller chunks of cellular spectrum the company now uses for older technologies, like 2G and 3G cellular and the old Nextel iDEN network.

The move to LTE is a complete about-face from last fall, when Sprint CEO Dan Hesse famously said “Our 4G strategy is WiMAX, full stop” in an effort to quell rumors about a potential move to LTE. Now it’s WiMAX that is at a full stop at Sprint, which is apparently ready to completely write off its substantial investment in Clearwire, a relationship once full of promise.

Though Sprint gave a detailed explanation and presentation about how owning its own LTE network would produce a better future, a question-and-answer period with analysts at the company’s event in New York Friday turned a bit ugly at the end, with one questioner testily asking how it made sense for Sprint to spend multiple billions building a new network instead of spending less to upgrade the Clearwire network, which it basically owned. Sprint CEO Hesse did little to provide any clarity on Clearwire’s future, pointedly refusing to comment on whether or not Sprint would provide any additional funding to Clearwire beyond its current agreement to pay for 4G services.

If the multiple questions during the event about Sprint’s decision to basically jettison Clearwire are any indication, it will be a topic the company will need to spend additional time answering in the weeks and months ahead. Sprint’s fellow shareholders in Clearwire are also probably not too happy about the announcement, which on Friday morning sent Clearwire’s stock tumbling 29 percent, down 59 cents to $1.46 per share by 12:30 Eastern time.

UPDATE: Clearwire has issued an official company statement in response to Sprint’s announcement, which follows below:

“As the largest wholesaler of 4G capacity, with unmatched spectrum, Clearwire is uniquely positioned to offer capacity to Sprint, and other carriers, particularly in urban areas where demand is high and their 4G spectrum will be inadequate. Sprint remains dependent on Clearwire for 4G and nothing about today’s announcement changes that. Even with their re-allocation of existing spectrum, it’s obvious that their spectrum resources are insufficient to meet the long term demands of mobile data, but this is not unique to Sprint. Data capacity will clearly stress the capabilities of the low capacity 4G deployments of other carriers due to their spectrum constraints.

“We are also working globally with other members of the Global TDD-LTE Initiative (GTI), including China Mobile, to develop a low-cost, highly scalable device ecosystem that will work across various LTE networks and frequencies. As demand for mobile data increases, Clearwire remains the only viable 4G wholesaler with an operating 4G network, substantial spectrum resources, and a global technology road map to serve this growing market.”

UPDATE 2: Reuters has a good financial-markets recap of the news, spelling out the drop in stock price for both Clearwire and Sprint and identifying our “angry analyst.”

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