September 22, 2008

WiMAXing Without Relaxing: Wireless Data JV Faces Challenges

While it certainly possesses game-changing potential, cable's aggressive wireless data play through the Sprint/Clearwire jv must still navigate a current funding shortfall, any future tech pitfalls and possible near-term competition before WiMAX's true yield can be reaped or even assessed. The deal to establish the project's investment vehicle and driver (a new Clearwire) must also close, although most involved believe the transaction will face little regulatory resistance and complete by YE. When that happens, venture partners including Comcast ($1.05bln), Intel ($1bln) and Time Warner Cable ($550mln) will pony up $3.2mln in investment cash, bringing to approx $14.5bln the total initial investment from all parties—yet that's not sufficient. "Clearwire... will need to raise an additional $2 billion before the network is completely built out," said Sprint CEO Dan Hesse during a Thurs conference, admitting that "the economy isn't ideal for raising capital at this time and may not be down the road." Still, Hesse expressed confidence that the project's heavy-hitting investor lineup will lure other partners. Interestingly, Mediacom's Rocco Commisso said back in May that it's "just a matter of time before we get involved [with WiMAX], as opposed to whether we will get involved." Comcast CFO Michael Angelakis, meanwhile, said this week that execution will be key in attracting new capital. WiMAX has tested well so far, delivering avg download speeds of 4Mbps and up to 10Mbps during a recent demonstration by Clearwire in San Francisco. Importantly, speeds are consistent with previous-stated goals for Baltimore, slated to go live this month, and for planned launches in Chicago and DC later this year. "With each successful launch, skepticism of Clearwire and WiMax should fade," wrote ThinkPanmure. Then there's AT&T and Verizon, who are unlikely to watch passively as cable adds mobile broadband options to service bundles. The telcos will use LTE 4G tech to compete with WiMAX, and Verizon pres/COO Denny Strigl surprised some this week with his avowals of basic LTE trials next year and commercial availability in '10, both sooner than widely expected. Think/Panmure, for example, posits that widespread LTE rollout in 2-3 years is "the best case" scenario. In any case, neither Strigl nor AT&T CTO John Donovan seems overly concerned about WiMAX. Donovan called it this week an "immature ecosystem," adding that AT&T's wireless broadband tech has "an upside that's still 5-10 times current speeds."