Sprint Nextel Demonstrates Key Technologies For Mobility Strategy
Sprint Nextel (NYSE: S) today demonstrated key technologies and described operational plans to provide unique new services to meet the growing demand for mobile communications during the Sprint Ahead Technology Summit.
The company detailed the expected capabilities and customer benefits of its planned WiMAX services and also announced its market branding for these services. In a separate release today, the company provided an update on its progress in delivering high-performance push-to-talk service, Nextel Direct Connect, on its CDMA network platform.
Sprint Nextel also provided Technology Summit attendees a first-hand user experience with its Pivot bundled services. Pivot features Sprint wireless services as part of a packaged service offering from joint venture partner cable companies. Additionally, the company showcased a variety of other technologies that are designed to leverage the company’s unique portfolio of spectrum, wireless and wireline assets to allow customers to communicate anytime, anywhere.
“We’ve executed the technology plan we laid out when we merged two years ago, and, in doing so, we have advanced our vision of becoming the mobility services leader,” said Gary Forsee, Sprint Chairman and CEO. “Our unique set of assets allows consumers to live the mobile lifestyle and businesses to increase productivity by making any place a workplace. Sprint is best positioned in the marketplace to offer these capabilities.”
Sprint announced today that its WiMAX service will be marketed under the XOHMTM ingredient brand (pronounced ZOAM). A soft launch of the WiMAX network is expected by the end of 2007 in the Chicago and Baltimore/Washington markets. XOHM commercial services are expected to be available beginning in the first half of 2008.
Barry West, President of 4G Mobile Broadband and Sprint’s Chief Technology Officer, noted that XOHM is expected to mobilize the Internet by driving the convergence of telecommunications, consumer electronics and the computer industries. WiMAX service is being designed to create synergies among disparate industries through an ecosystem of chipsets, devices, networks, services/content and distribution to deliver broadband with speeds up to five times faster than current third-generation wireless devices. West said that ecosystem partners have committed to embed 50 million WiMAX chipsets in devices.
There is significant momentum around Sprint’s WiMAX efforts. Since announcing its initial plans nearly a year ago, the company has greatly expanded its ecosystem of device, chip and other partners and selected Google to bring WiMAX mobile Internet customers search, interactive communications and social networking tools through a new mobile portal. The company expects to begin offering 4G mobile broadband services up to two years ahead of other national wireless carriers.
Under its planned network sharing agreement with Clearwire, which was announced last month, Sprint Nextel currently expects the network buildout to reach 100 million people by the end of 2008 with Sprint providing coverage to 70 million and Clearwire to 30 million people. Sprint’s coverage is expected to grow to approximately 125 million people by the end of 2010. At that level of buildout, the potential market would include an estimated 48 million U.S. households, nearly 5 million small office/home office subscribers, and more than 130 million consumer electronics devices.
Pivot service, now available in 20 markets with plans for at least 40 by year-end, allows Sprint and its cable partners to bring the benefits of mobility and convergence to their customers by leveraging both landline and wireless networks. Paul Saleh, Sprint Nextel’s CFO, said the company expects meaningful growth in Pivot subscribers over the next 18 months, and that the service is expected to generate new revenue streams through new services, including remote DVR programming and video-on-demand.
In addition to serving nearly all of the Fortune 500 and thousands of smaller businesses, Sprint’s wireline assets are supporting the strong growth in Voice-over-IP (VoIP) services through leading cable companies and are a cornerstone of the company’s strategy to deliver converged services, Saleh added. In the second quarter, cable VoIP revenues increased 60 percent annually. The company noted that forecasts call for the overall VoIP market to more than double in the next four years.
Sprint Nextel also announced updated financial targets for its WiMAX business, reflecting final execution of the agreement with Clearwire:
The company expects to generate between $2B and $2.5B in revenues for the fiscal year 2010 with more than 80% generated from new lines of business.
The company expects that the WiMAX initiative will be positive for Operating Income Before Depreciation and Amortization (OIBDA) in 2010.
Sprint Nextel expects to invest approximately $2.5 billion in capital for WiMAX through year-end 2008. Beyond 2008, network build is expected to be increasingly success-based. The company currently expects that extending its coverage to approximately 125 million people by year-end 2010 would require an additional capital expenditure of approximately $2.5 billion.
The WiMAX initiative is expected to generate positive Free Cash Flow beginning in 2011 as the annual OIBDA contribution is expected to exceed capital expenditures, working capital and other cash requirements.
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