Clearwire and Sprint: Squeezed Together?

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Sprint faces a similar predicament. It may still hope to recover from its market drubbing by building a next-generation network offering mobile broadband connections, a potential competitive advantage against its chief rivals in the cellular industry. But Sprint, which recently recorded a stunning $29.7 billion writedown (BusinessWeek.com, 2/28/08) in the value of its assets, is losing customers and bleeding money. With just $2.25 billion in liquid assets, the company is struggling just to upgrade its existing networks. "At this point, Sprint and Clearwire would be glad for anybody to write them a check," Piecyk says. "This is [Sprint's] escape plan."

As a result of their mutual miseries, it's likely that potential corporate investors are calling the shots in any Sprint-Clearwire negotiations. Analysts say Intel, Motorola, SK Telecom, Google (GOOG), Comcast (CMCSA), Best Buy (BBY), and even Singapore Telecom may be hammering out a joint venture between Sprint and Clearwire. Although the WiMax market has developed more slowly than some had hoped, the outlook remains bright enough for these investors to take a chance. ABI Research forecasts that U.S. WiMax service revenues will add up to more than $10 billion by 2012.

Patience, Patience

Still, many of these would-be investors are also being squeezed by the current economic downturn. Motorola's handset business is ailing and likely in need of extra cash. And Intel, hurt by weaker memory pricing, just lowered its guidance for first-quarter profit margins.

Many analysts still consider a Clearwire-Sprint venture likely: Intel has already poured billions into developing WiMax technology and needs a nationwide WiMax network to make that investment pay off. But hammering out an agreement could take time. "You have a lot of big, very powerful companies engaged here," Kainer says. "It's like trying to get elephants to dance."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.