The Wall Street Journal-20080130-Sprint Nextel in New WiMax Bid- CEO Hesse Revives Talks With Start-Up Clearwire On New Wireless Network

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Sprint Nextel in New WiMax Bid; CEO Hesse Revives Talks With Start-Up Clearwire On New Wireless Network

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In the last few weeks, newly installed Sprint Nextel Corp. Chief Executive Dan Hesse has moved quickly to impress investors with layoffs and an upper-management shake-up at the wireless carrier. Now there are signs he is teeing up a bold restructuring of the company's $5 billion plans to build a new high-speed wireless network using WiMax technology.

Sprint has revived serious discussions with WiMax start-up Clearwire Corp. to form a joint venture that would bring in outside funding from the likes of Google Inc., Intel Corp. and Best Buy Co., people familiar with the matter say. The plan could dramatically lower the price tag of Sprint's WiMax project and allow Mr. Hesse to focus on fixing the company's core cellphone business -- answering two concerns Sprint investors have had.

Wall Street is looking for any signs of life at Sprint, the nation's third-largest cellular operator, which has seen an exodus of subscribers to rivals AT&T Inc., Verizon Wireless and T-Mobile USA in the past year. The company warned two weeks ago of high subscriber losses in the fourth quarter, sending its stock plunging, although it has rebounded somewhat in recent days. Sprint shares were up 8.3%, or 83 cents, to $10.80, in 4 p.m. composite trading on the New York Stock Exchange.

There is no guarantee the joint venture will materialize or that the companies will secure external funding. Sprint and Clearwire have hit bumps before in this effort. Last year the two companies tentatively agreed to a more-modest cost-sharing partnership on WiMax, but the deal was scrapped in November, partly because Sprint was operating without a CEO at the time and was reluctant to make any major moves. A spokeswoman for Sprint and a spokesman for Clearwire both declined to comment.

WiMax is designed to provide wireless Internet access for laptops and mobile devices at speeds comparable to landline connections. Sprint has already begun rolling out its WiMax network in some markets and said it wants to reach 100 million U.S. consumers by the end of this year.

Most analysts say Sprint and Clearwire could build a nationwide network much more quickly and cost effectively if they join forces, since they own vast amounts of radio spectrum in different regions of the country. For Clearwire, a Kirkland, Wash. start-up founded by cellphone pioneer Craig McCaw, sealing an agreement with Sprint would be a major boost. Yesterday, after the Journal's Web site reported the latest talks, Clearwire soared, ending up 23%, or $2.89, to $15.34 in 4 p.m. composite trading on the Nasdaq Stock Market.

Sprint and Clearwire have been aggressively reaching out for strategic financing to Google, Intel, Best Buy and some cable providers in recent weeks about financing a WiMax initiative. Wall Street buzzed yesterday about the potential that a foreign strategic telecom investor might also jump in.

Intel is a logical participant since the computer chip maker has been one of the main backers of WiMax and is already a Clearwire stakeholder.

Search giant Google has been looking for more avenues to distribute its software on cellphones, including a new operating system called Android. The company is a registered bidder in the ongoing auction of radio spectrum at the Federal Communications Commission and has said it could pledge $4.6 billion or more to obtain frequencies. (Blind bidding on the spectrum Google is interested in reached $3.8 billion yesterday.)

The Sprint-Clearwire venture could be an alternate route for Google. Sprint and Clearwire have already announced separate agreements to offer Google software to their WiMax subscribers. Still, a person familiar with the situation cautions that Google's interest is tepid and any investment is likely to be limited to a few hundred million dollars.

People close to the talks say Best Buy has expressed interest in selling Best Buy-branded wireless service through some kind of resale agreement with Sprint. Representatives from Google, Intel and Best Buy declined to comment.

Even as Sprint hunts for financing for its broadband project, it is attracting separate interest from private-equity firms who see its low stock price as a chance to buy a significant equity stake in the company, people close to the situation say. New financing could help Sprint pay for its WiMax initiative without raising any new debt, but the company might be reluctant to issue new shares now, because that could anger investors who bought in at a much-higher valuation.

WiMax could be a sorely needed distinguishing point for Sprint, especially if new WiMax devices emerge that capture consumers' interest. Amazon.com Inc., whose Kindle e-reader works over Sprint's existing cellular network, has approached the carrier about building a separate WiMax mobile device that would be tailored more to Web surfing, multimedia downloads and e-commerce, according to a person familiar with the discussions. One issue in the talks is how much Amazon would have to pay Sprint for wireless access, the person said. An Amazon spokesman declined to comment.

But many investors are skeptical that WiMax will live up to its promise and justify Sprint's planned investment.

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Kevin J. Delaney contributed to this article.