KIRKLAND, Wash. & OVERLAND PARK, Kan. – Intel, Google, Comcast, Time Warner Cable and Bright House Networks said they will invest US$3.2 billion in a new mobile broadband company being created by U.S. telco Sprint and WiMax company Clearwire, the companies all announced Wednesday.
The new company, which will be named Clearwire, will be focused on expediting the deployment of the first nationwide mobile WiMAX network to provide a true mobile broadband experience for consumers, small businesses, medium and large enterprises, public safety organizations and educational institutions, says the press release. The new Clearwire expects to dramatically enhance the speed and manner in which customers access all that the Internet has to offer at home, in the office and on the road.
The new Clearwire is targeting a network deployment that will cover between 120 million to 140 million people in the U.S. by the end of 2010.
The investment by the five strategic investors (three cable companies, semiconductor manufacturer Intel and Google) will be based on a target price of $20 per share of Clearwire’s common stock, subject to a post-closing adjustment.
Upon completion of the proposed transaction, Sprint will own the largest stake in the new company with approximately 51% equity ownership. The existing Clearwire shareholders will own approximately 27% and the new strategic investors, as a group, will be acquiring approximately 22% for their investment.
The total being invested is about $14.5 billion.
"For Sprint shareholders, this is an opportunity to unlock and bring visibility to the value of our significant spectrum assets, technology and expertise, by leveraging the technology, applications and distribution strengths of our investors, who together command nearly a half-trillion dollars in market capitalization," said Dan Hesse, president and CEO of Sprint. "We’ve made an excellent start developing XOHM WiMAX services. Contributing those advances to a strongly backed new company – in which we’ll hold the largest interest – provides Sprint with additional financial flexibility and allows Sprint management to leverage and focus on our core business.
"Additionally, the agreements allowing the new company and our cable company investors to bundle and resell Sprint’s third-generation wireless services strengthen the distribution of our current services while reducing the complexity and enhancing Sprint’s cable relationships," Hesse added.
"The power of the mobile Internet, which offers speed and mobility, home and away, on any device or screen, will fundamentally transform the communications landscape in our country,” said Clearwire chairman Craig McCaw. “We believe that the new Clearwire will operate one of the fastest and most capable broadband wireless networks ever conceived, giving us the opportunity to return the U.S. to a leadership position in the global wireless industry.
"Google is a firm believer in supporting new ways for people to access the Internet," said Eric Schmidt, CEO and chairman of Google. "We are proud to invest in the new Clearwire alongside several leading technology and communications companies, and we believe that its planned WiMAX network will increase the ability for users to get high-speed broadband anytime, anywhere."
"This is a great coalition of innovative companies that have joined together to create the next generation of mobile wireless products. It is exciting to be on the ground floor of this new venture that we believe will create unprecedented high-speed wireless products and make them available across the nation," said Brian L. Roberts, chairman and chief executive officer of Comcast. "This transaction is attractive to us strategically and financially and puts in place very attractive wholesale relationships for access to Sprint’s existing 3G and Clearwire’s 4G networks, giving us complete flexibility to introduce wireless mobility in terms of product innovation and deployment."
Mobile WiMAX is a standards-based wireless broadband technology designed to operate multiple times faster than today’s 3G wireless networks. With embedded WiMAX chipsets in laptops, phones, PDAs, mobile Internet devices and consumer electronic equipment, mobile WiMAX technology is expected to allow users to wirelessly access a range of multimedia applications, such as live videoconferencing, recorded video, games, large data files and more – anywhere in the network coverage area.
The transaction has been approved by all of the parties’ boards of directors, and is expected to be completed during the fourth quarter of 2008.
In addition to spectrum, Sprint will contribute to the new Clearwire certain hardware, software and all of its WiMAX-based trademarks and other WiMAX-related intellectual property. The new Clearwire expects to materially reduce capital and operating expenditures by leveraging Sprint’s existing infrastructure, reducing the cost of building out the mobile WiMAX network nationwide. The new Clearwire expects to utilize Sprint’s towers, fiber network and IT support at favorable bulk rates.
Intel will work with manufacturers to embed WiMAX chips into Intel(R) Centrino(R) 2 processor technology-based laptops and other Intel-based mobile Internet devices, and will market the new company’s service in association with Intel’s performance notebook PC brand.
Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product. Google will partner with the new Clearwire on an open Internet business protocol for mobile broadband devices. The new Clearwire will support Google’s Android operating system software in its future voice and data devices that it provides to its retail customers.
Sprint, Comcast, Time Warner Cable, and Bright House Networks will enter into wholesale agreements with the new Clearwire, becoming 4G providers of new Clearwire’s mobile WiMAX service.
Comcast, Time Warner Cable, and Bright House Networks and, after completion of the transactions, the new Clearwire, will enter into 3G wholesale agreements with Sprint, becoming bundled providers of Sprint’s wireless voice and data services, expanding the reach of Sprint’s network to more customers, while providing the cable companies a simpler, more effective vehicle to bundle wireless services.
Sprint and Google have also entered into an agreement related to Sprint’s mobile services, whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint. Sprint will also preload several Google services – including Google Maps for mobile, Gmail and YouTube – on select mobile phones and provide easier access to other Google services.
Google and Intel have options to enter into 3G and 4G wholesale agreements with Clearwire and Sprint respectively and have no current plans to do so.
