Gary Forsee’s hasty departure from Sprint Nextel could derail its most ambitious project – the $5bn rollout of a nationwide broadband wireless network based on an emerging technology standard called WiMax.
Sprint Nextel’s board has said it is focusing on external candidates to replace Mr Forsee and hopes to complete the search quickly. The new chief executive is certain to focus initially on improving Sprint Nextel’s performance in core areas such as customer service, subscriber retention and network integration following the troubled $36bn acquisition of Nextel Communications two years ago.
But analysts and industry insiders say Mr Forsee’s successor will also likely take a close look at the strategy of competing with AT&T’s mobile business and Verizon Wireless, the market leaders. In particular, the new chief executive will want to scrutinise the assumptions underpinning the WiMax project, dubbed ‘Xohm’, and Sprint Nextel’s partnership with Clearwire, a WiMax pioneer.
“We would expect longer-term initiatives such as the Clearwire WiMax partnership to be [put] on hold and subject to review by a new leadership team,” said Jason Amstrong, a Goldman Sachs analyst, in a note to investors on Tuesday. Clearwire’s share price was sharply down last week on speculation of a change in Sprint Nextel’s management.
It was only a year ago that Mr Forsee, flanked by executives from Intel, Samsung and Motorola, announced his plans to roll out a nationwide 4G network by 2010 based on WiMax.
Then last month, announcing a Clearwire partnership to speed the deployment of the 4G network, Sprint Nextel broadened the project’s scope and raised its cost estimates to $5bn.
Senior Sprint executives say they have at least a two-year lead in deploying a 4G network capable of delivering DSL broadband-style data connections to road warriors, and providing cost-effective fixed broadband access to rural clients that allows machines and vehicles to communicate.
But not everyone has welcomed the move. Investors such as Ralph Whitworth, who holds a 1.9 per cent stake in the company, question the wisdom of spending so much on a network based on relatively unproved technology. Others wonder if customers who were slow to adopt wireless data services are ready for WiMax.
Such doubts have been dismissed by WiMax advocates including Motorola, which has placed its own big bet on the technology, although it also supports alternatives.
On paper at least, WiMax looks good – it delivers three times the data rate and two times the spectral efficiency of current technologies at half the cost.
If Sprint Nextel’s new chief executive decides to slow or halt the Xohm project, it would be a blow to WiMax developers.
It might also reinforce the reputation of the US as a telecommunications industry follower. Motorola already has 12 commercial WiMax contracts and more than 40 WiMax trials under way in countries such as Pakistan and Germany, and, at least for the moment, the US.