[qi:___wimax] [qi:045] Sprint Nextel’s (S) rough patch is turning into a highway from hell. The exit of CEO Gary Forsee, questions about its plans for a WiMAX network and its aborted partnership with Clearwire (CLWR) have provided fertile ground for all sorts of rumors. Rich Tehrani reports on one such rumor: Google buying Sprint, then spinning out the phone business.
Ludicrous? Maybe. Maybe not. I don’t have first-hand knowledge as to whether or not this rumor is even remotely true, but there is one way it could all make sense.
Sprint spins out its WiMAX business. Let’s call it — for lack of a better name — 3rdPipeDream Inc. Sprint owns a big chunk of equity of this company, mostly because it owns a lot of spectrum and has built out some parts of the network. 3rdPipe then invites titans of Silicon Valley to invest. Since it is going to cost Sprint around $5 billion to build out its WiMAX network, it is safe to assume that 3rdPipeDream is going to need more than $5 billion.
Google (GOOG), Intel (INTC), Cisco Systems (CSCO), Apple (AAPL) and a whole slew of Silicon Valley companies that need the “third broadband pipe” could team up and invest in the new company – but on a premise that 3rdPipeDream will operate as a wholesale wireless broadband network, following the rules similar to the ones proposed by Google for the 700 MHz auction. Most of these companies are sitting on mountains of cash and could put it to good use by breaking the broadband duopoly.
Those in Silicon Valley who have often lamented about not getting an even (broadband) playing field can now put their money where their mouth is — in the third pipe. A total investment of $3 billion could help the new company raise an equal amount in debt, backed by anchor tenancy of, say, Google, which is desperate to extend its reach to the wireless domain.
Google CEO Eric Schmidt had previously indicated that his company wouldn’t hesitate to participate in the 700 MHz wireless spectrum auctions, where the opening bids could be in the $5 billion range, so an investment in this WiMAX-only company isn’t that unreasonable, especially if it can offer ad-supported wireless services.
Similarly, Intel, which had invested $600 million in WiMAX service provider Clearwire, could invest in this hypothetical company because it will help sell chips. Maybe Intel can help convince Clearwire to throw in its lot with 3rdPipeDream. Cisco and Motorola (MOT) and others have their own vested interests — selling equipment, for instance. And Steve Jobs & Co., when given access to true wireless broadband, could turn iPod Touch into a truly disruptive device.
Now what are the odds of this happening? As high as A-Fraud returning to the third base in the Yankees stadium.
As for Sprint, this could bring some clarity to its business. (Talking about spinning off their businesses, the company should also consider spinning off its iDEN business which could serve the government and related entities such as police and fire departments. With this network out of the way, Sprint should refocus its attentions on consumer wireless or try and sell its CDMA business to Verizon.)
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Superpoke: Why just poke when you can pinch, hug, tickle, pwn or even throw sheep?
28 thoughts on “Should Sprint Send Silicon Valley a Super Poke?”
Google stock wil decline by 50% if this ever happens
i think this is a better option than buying spectrum and then building it out. they put $900 million in myspace deal so this actually be monetized even better. so it is not that crazy. but as i said – a-fraud coming back to 3rd base at the yankee stadium 😉
I have to agree here with Om here.
Google has had a hard time trying to buying spectrum. Even if they were to buy significant amounts of spectrum it would take them far longer to integrate the technology rather than buying Sprint’s already better than the others technology. Let’s face it Sprint’s market cap of 46.43B is at a 15-year low. They could easily sell off traditional landline business to either Verizon or Qwest in a heartbeat. I think it’s a good deal and the stock of both companies would benefit not to mention the consumer. Just my opinion!
It would squarely position Google against MNOs. While I agree that an aquisition would be way smarter than buying spectrum and building infrastructure, this would be a US-play.
Antagonising the MNOs in the rest of the world is something that even Google cannot afford – the backlash would cripple any momentum Google hopes to build in the mobile arena.
Google is so far the ultimate Gatekeeper, they will not get their hands dirty going into soon-to-be utility industries, ‘bit-pipes’ or other.
They function one layer above that, in the ‘added value’ stratosphere, with for e.g. some chips apready placed on WiFi For Everyone (yes FON.com will be big). Let’s just say that the timing and positioning is not idyllic for going all-in into the infrastructure of one a competing technology 😉
That said, the Wimax vs. Wifi debate is only starting.
This is not far fetched at all. Google makes money selling ads on ‘webpages’ and if spending $5B on whatever generates an acceptable ROI and gives them greater control of the packets from end to end, then it gets done. If it’s not Sprint it will be some other company…
I agree with you, but if this was in a “guise” of a consortium investing in the new company, which could theoretically be publicly traded one day, this might not be such a big issue for google.
however, we are mere reporters, and the powers that be at google and sprint might have a better handle on things.
Google: What If.
Google would be foolish investing in any existing 2.5Ghz based WiMAX system or service. It is at best a near term (2010Max)service offering until the 700Mhz spectrum is freed up for use in delivering true Broadband Wireless services. Foliage (the absorbiant factor)will ultimately limit quality deployment coverage in most East Coast Metro and all East Coast rural markets. Now if Motorola/Intel were able to show Google that any WiMAX base stations deployed with 2.5Ghz radios could be upgraded to 700Mhz cost effectively they might be a prospect.
If they (your 3rdPipe partners idea I love)partner with Sprint it would only be to operate the 700mHz network in late 2009-2010. All these partners are missing the Last Mile piece and the 700Mhz will provide them a viable network.
“Let’s face it Sprint’s market cap of 46.43B is at a 15-year low. They could easily sell off traditional landline business to either Verizon or Qwest in a heartbeat.”
They already spun it off — it’s called Embarq (NYSE: EQ), and it’s been public for more than a year and a half.
Hmmm… If I am getting this right? Sprint spins off the WIMAX thing and sells the business to Google, thus Sprint is only left with mobile voice. Google somehow builds the national WIMAX service and starts offering services – mobile VoIP among others. So basically Sprint will be grooming new competitor
A 700 Mhz antenna is 3.5x longer and larger/wider than a 2.5 GHz antenna for the same gain and pattern. Thus unlikely that a combo device retrofit could be fitted in the same rented space on the already jointly used cell tower facilities. Many times the rent is per coax downlead plus space [square area] because of high windload design limitations.
Will nonincumbents be welcomed with open arms by existing tenants. Lots of contracts restrict players due to technical roadblocks.
The question for Google is how [if?] the smaller [auction purchaseable] channel width [5,10,20] at 700Mhz exceeds the ability to use 48-100+MHZ at 2.5 Ghz. Don’t you need both, one for city one for rural?
It is amazing how people understand the web, but not the underlying telecom world. Telco is an ugly business that has to lobby to stay on par with Ma & Ivan Bell (VZ and ATT) and to kiss the K-Mart ring.
Sprint has an underutilized, national, Tier 1 IP backbone. Sprint has forgotten that it used to be the # 3 Long Distance company. Not just MSO’s (read: cablecos) need VoIP Orig/Term services. $50B for a teleco that doesn’t have a clear focus isn’t a bad deal.
There are many underutilized assets at Sprint — and a management team that has no idea what to do with it. At least, Google allows every employee to contribute. Sprint could use some good ideas, like an iDEN division focused solely on public safety and gov’t work.
No Viado, I am saying is that Sprint spins off the WiMAX business, and gets others to invest in the company. $3 billion from a variety of investors including Google, not just Google. And raise rest of it as debt. In essence this is a standalone company where some silicon valley giants like Google are investors.
The 700 MHz auctions are in February 2008 and by the time networks come alive it would be nearly three-to-five years and that means there will be no meaningful impact. So if anyone wants to keep expanding their business, aka Google, to mobile domain, it isn’t going to happen anytime soon. So perhaps that is why this WiMAX based network is a decent enough option.
It’s been rumored Google has joined the WiMAX Forum, but we don’t see their name listed in the member roster:
Please see my post, ” Why Google Should Team Up With A WiMAX Equipment Vendor (Cisco?) and Bid for the 700MHz Spectrum”
I believe that if Google teams up with a WiMAX network equipment vendor and bids for the 700MHz spectrum, then mobile WiMAX will likely succeed in the U.S. If not, the disparate networks of SPRINT and Clearwire will be insufficient (especially with no roaming) to build market share.
A drastic move would be to buy SPRINT and start giving all service away for free.
In addition the company could reinitiate the ClearWire talks and work with this company and others to blanket the world with a free (or at least ad-subsidized) WiMax network.
God, I hope NOT…
What are the odds now that it looks like A-Fraud will be back at third base? Really, who else could have, or would have been able to afford A-Fraud?
In response to Laz Sanchez:
It’s only a matter of time before it happens (a “free or at least ad-subsidized” connectivity blanket). It is likely to start as a combination of WiFi and Wimax depending on coverage and accessibility in diffferent regions.
The synergies in the mobile/Internet ecosystem make this blanket inevitable on the long term (let me emphasize long), regardless of what happens to Sprint’s Xohm right now.
The cooperative Alliances across the industries (mobile/ internet) and accross the value chains(hardware/ operators/ gatekeeper) are taking shape already with Google in the front row, without having to invest in the bit-pipe themselves. But it will take some time for the gears to lock into each other and for the different interests to align nicely enough to create this blanket you describe.
The question is what happens next? do other industries replicate the business model? do you get free electricity if you agree to buy wall switches with small ads on them…
… or rather, does the key lie in the open-sourced user-created content in the case of the mobile/Internet industry, and not in the ad-subsidies? or in the mobility itself? (I’m thinking location based services?)
One thing is for sure: all options are open, and conditions are being proactively optimized for the ideas to start popping up (android). the end is certain, the means will be developed collectively by 1 billion connected internet amateurs.
Embarq was only Sprint’s LOCAL Wireline division. Sprint still has a World Class IP network and Voice network that 30% of the world’s traffic goes over.