Sprint's WiMAX strategy will likely undergo a tweak

Let me go on the record as saying I don't believe Sprint Nextel will abandon its WiMAX plans in light of investor pressure and the apparent ouster of Chief Executive Gary Forsee [1]. I do believe, however, those plans may very well undergo a tweak.

First, as I mentioned last week, Sprint Nextel is required to offer service in the 2.5 GHz band [1]. The FCC didn't force Sprint to divest the vast amount of 2.5-GHz spectrum it gained through its $35-billion merger with Nextel in 2005. In return, Sprint-Nextel promised to offer wireless broadband to at least 15 million people within four years and another 15 million within six years.

The conundrum Sprint Nextel's next CEO will find him or herself in, unfortunately, is several fold. Churn is out of control and the integration with Nextel is a mess. These two factors compound the pressure put on Sprint's $5-billion WiMAX plan, which amounts to a market experiment at this point. There are a lot of painful decisions to be made. As such, the new Sprint manager will have to get creative to find ways to appease investors. Sprint allayed fears before through its Clearwire to jointly construct their WiMAX networks [2]. The operator could very well look for more partnerships, with its cable partners maybe? After all, WiMAX promises cheap data capacity that makes it an attractive medium for video delivery. Certainly foreign investors have an eye on growth opportunities in the U.S. market. Intel Capital seems to have money to throw at WiMAX.

At any rate, Sprint needs to get a new CEO at the helm who has experience rolling out industry-changing technology and managing investor expectations around it. Two men come to mind here. Tim Donahue, the former executive chairman of Sprint Nextel who retired at the end of 2006, and Andy Sukawaty, former president and CEO of Sprint PCS and current CEO of and Chairman of satellite provider Inmarsat.

Donahue was the president and CEO of Nextel prior to the 2005 merger and has experience with new technology and managing its expectations. And he certainly can turn around the lagging PTT business. In the 1990s, Nextel's iDEN service was a new concept as was the PTT business model. Nextel experienced record setting financial results under Donahue's leadership, with nine straight quarters of positive net income.

Sukawaty successfully managed Sprint PCS' first foray into the PCS industry, guiding Sprint through the country's first deployments of CDMA technology in the 1900 MHz band. Sukawaty directed the PCS business from a privately held partnership to a publicly traded entity valued at more than $50 billion, which was the best performing large cap in the S&P 500 in 1999.

I can imagine wooing either one of these executives would be a significant undertaking. Sukawaty reportedly has been unsuccessfully courted many times in the past by Sprint. And Donahue is probably playing golf somewhere warm.-Lynnette [3]