Can Sprint's WiMax Alliance Last?

A partnership with Google, Comcast, and Time Warner—if it works—might finally enable the building of a next-generation wireless network

by Cliff Edwards

It's crunch time, yet again, for Sprint's troubled next-generation wireless network—and the unlikely collection of on-again, off-again partnerships the company needs to get the technology off the ground.

Google and the nation's two biggest cable TV companies are among the investors finalizing negotiations to provide up to $2.5 billion for Sprint and a smaller wireless provider named Clearwire to build the nationwide network, according to a source close to the talks. "The deal is about 90% done," but could fall apart at the last minute before a planned Apr. 1 announcement, this person says.

The proposed alliance with Comcast, Time Warner, and a smaller provider called Brighthouse Networks would revive the cable industry's soured relationship with Sprint, whose financial travails have forced it to find more backing for the new network based on a Wi-Fi relative called WiMax. It would also finally bring to fruition a lengthy dalliance between Sprint (S) and Clearwire (CLWR) that seemed to unravel late last year.

What binds these bedfellows? One motivation is their common interest in forging a bulwark against the biggest and most formidable telecom service providers, AT&T and Verizon.

Joining Forces?

Under the proposed deal, Sprint would spin off its Xohm-branded WiMax business and merge it with Clearwire to create what they hope will be the first company to deliver so-called 4G, or fourth-generation, speeds to mobile devices across the U.S. Sprint and Clearwire have been exploring ways to join forces for such a venture for two years, with the possibilities ranging from simple roaming agreements to a full-fledged merger of WiMax efforts. But to date they haven't been able to agree on funding or management for the $5 billion project.

Indeed, it still wasn't immediately clear whether a Sprint or Clearwire executive would take the lead in Xohm's operations, nor where the new company would be based. But to resolve the financial hurdle, Comcast (CMCSA) may contribute up to $1 billion, with Time Warner (TWX) and Brighthouse Networks contributing lesser amounts.

Google (GOOG), meanwhile, may finally invest real money in a wireless venture after making plenty of noise before a recent federal auction of wireless airwave licenses—only to place a token bid and walk away empty-handed. The Internet search company is in talks to contribute a further $1 billion to Xohm, according to two sources.

And Intel (INTC), still intent on forging a new market for its WiMax chips, may supplement its $2 billion investment in Clearwire with some funding for the joint venture. But Motorola (MOT), another early investor in the technology, is not expected to join another funding round as it focuses on spinning off its troubled wireless handset division from its network equipment business.