Sprint and Clearwire have terminated the letter of intent (LOI) that would have had the two companies rolling out a combined WiMax network covering 100 million potential subscribers by the end of next year, the two companies have announced.
The parting, which was described as mutually agreed upon, came about because the "two companies could not resolve complexities associated with the LOI and failed to reach final agreement on the terms of the transaction," according to a statement from Sprint.
The statement added that Sprint remained committed to WiMax development, and the company expected to partner with Clearwire in the future.
The cancellation of the LOI is another snag for Sprint's WiMax strategy. Sprint had already weathered investor complaints about its bold -- and costly -- WiMax deployment plans. The ouster of Sprint CEO Gary Forsee has left those plans in a state of uncertainty, although the company still publicly backs the technology.
Clearwire, a young startup with about $100 million in combined backing from Intel and Motorola, said in a statement: "Discussions continue regarding the best means to accomplish the benefits that were expected under the letter of intent."
Daryl Schoolar, senior analyst with In-Stat, said the announcement was a bigger blow to Clearwire than to Sprint, though both companies would be more challenged to stay competitive without the agreement.
"I think WiMax, if the investors could stomach the fact that it's going to lose money the first few years, could really develop a new revenue stream for them," Schoolar said, adding that such patience was not a sure thing. "[Sprint's WiMax deployment] is very much an emerging market, while many Sprint investors were looking for a mature company."
Schoolar said that even if the cancelled agreement signaled a shift in Sprint's strategy, WiMax would continue as a major technology.
"Even if Sprint isn't successful, WiMax isn't going to go away. It's just going to be outside of the U.S.," he said, pointing to current deployments in Russia, Colombia, the Middle East and Africa. He said that more important than Sprint's infrastructure was its potential influence on bringing a variety of devices to the market.
"If Sprint was successful," Schoolar said, "I think that would really open up the eyes of companies in other economies, saying: 'Look, there's a whole other revenue stream we can go after.' " He said he saw a strong possible consumer market, with home users wanting to take their broadband with them without a separate bill, similar to the way cell phones partially or completely displaced landlines for many consumers.