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Sprint: No more Clearwire devices after 2012
Question of the Day
NEW YORK (AP) - Sprint Nextel Corp. said Friday that it will stop selling phones and other devices compatible with Clearwire Corp.’s current network at the end of next year, after it switches on its own higher-speed, fourth-generation data network.
Clearwire’s stock fell 65 cents, or 32 percent, to $1.40 in afternoon trading Friday. Earlier in the day, the shares revisited an all-time low of $1.32 hit in August.
Sprint’s stock also fell, but for different reasons. The company held an event for investors and analysts in New York on Friday, but it didn’t say how it expects the iPhone to affect its results, now that it’s able to sell the coveted smartphone. It also said it will need to raise more money to finance the construction of its new network.
Sprint, which is based in Overland Park, Kan., started taking pre-orders for the iPhone 4S on Friday and hopes that the phone will help the company recruit and keep customers in competition with AT&T Inc. and Verizon Wireless. But Sprint will pay Apple dearly for the privilege of selling the phone.
An iPhone that Sprint sells for $200 with a two-year contract costs $600 or so wholesale from Apple. Like other carriers, Sprint has to count on making up the difference over time through service fees. Analysts were looking for some clarity on Sprint’s math here, and were frustrated.
CEO Dan Hesse said the iPhone would over time “be one of our most profitable devices” but did not elaborate.
Sprint’s stock was down 42 cents, or 14 percent, at $2.60.
Analysts were also perplexed that Sprint isn’t including Clearwire in its network revamp project. Sprint’s president of network operations, Steve Elfman, said that the company is already building its own fourth-generation, or 4G, data network and will inaugurate it next summer. By the end of 2012, it will cover as many people as Clearwire’s network does today, and a year later, it will be far larger.
Sprint is using a 4G technology known as LTE, for Long-Term Evolution. Rivals AT&T Inc. and Verizon Wireless are using the same technology. Clearwire, on the other hand, uses an earlier technology called WiMax. That means today’s “Sprint 4G” devices will need to be replaced to use the new LTE network.
Clearwire, which is based in Kirkland, Wash., has said that it plans to build an LTE network in parallel with WiMax, and Sprint’s Hesse left the door open to having Sprint buy access to that network after 2012. However, Clearwire’s finances are weak, and it would need additional funding to build out LTE.
In a testy exchange with Sprint executives, a member of the audience at the investor meeting questioned why Sprint would risk forcing Clearwire to seek bankruptcy protection when it owns 54 percent of the company, and could lose its share of Clearwire’s spectrum in a bankruptcy case.
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