The proposed US$14.5 billion WiMax joint venture created by Sprint Nextel Corp. and Clearwire Corp. with $3.2 billion invested by five other companies, will be complex and cumbersome to manage, according to industry analysts.
Joint ventures in the communications industry are notoriously difficult to manage and often fail, analysts said. That's due partly to the enormous stakes involved but also because of the influence and the egos of the various players who must sit at a table together to work out the details.
"Joint ventures often have too many cooks in the kitchen," noted Jack Gold, an analyst at J. Gold Associates. "This one will only work if the Clearwire folks are given automony to make the decisions they need to make without undue second guessing and meddling from the partners."
Gold and other analysts noted that the biggest factor in favor of the new Clearwire venture is that all the parties want desperately for it to succeed. Still, it will be complex, and its success will depend on the management savvy of wireless pioneer Craig McCaw, who founded Clearwire and will be the chairman of the new company.
"It looks like management will fall under McCaw, so as long as he can maintain peace amongst the partners, he has the experience to make it work," said Philip Redman, an analyst at Gartner Inc. Redman said McCaw has had failures and successes in wireless business ventures and would be able to use those experiences to his advantage.
As announced, Sprint would have 51% of the ownership of the new Clearwire company and seven of the 13 board members. However, the CEO of the new company will be Clearwire's current CEO Ben Wolff, while the board's chairman will be McCaw.
But the influence of the additional five investing companies is what gives analysts the most pause, since all are influential companies with a great deal at stake in the buildout of a massive national network based upon what is still an emerging technology. That list of five is made up of Intel Corp., Google Inc. and three cable companies eager to get into wireless data; Comcast Corp., Time Warner Cable Inc. and Bright House Networks. Venture capital firm Trilogy Equity Partners is also expected to invest directly in the new Clearwire's common stock.
Trilogy CEO John Stanton will serve as one of the 13 directors, along with McCaw, Sprint CEO Dan Hesse, Comcast Chairman and CEO Brian Roberts and Time Warner CEO Glenn Britt. Sprint still must name five other directors, and Intel will name one director, while the five outside investors will name an independent director. A final independent director will be nominated by the board.
Gold said Clearwire and Sprint have been motivated for months to create the venture, but Intel could be the most desperate in the group of investors.
"Remember, this joint venture is a shotgun marriage, driven to a large extent by Intel, which has invested billions in WiMax technology and doesn't want to see it go away," Gold said. Likewise, the cable companies don't want to see WiMax eat into their existing customer base, he added.
Meanwhile, Sprint needs the success of WiMax as a growth engine, even as it is facing losses of wireless subscribers, including those of Qwest, which recently announced it was taking its customers to Verizon Wireless.
"What else does Sprint have?" Gold asked. "WiMax is their best bet on the future."
Here are some of the most recent failed joint ventures in the communications industry:
Concert Communications Services might be one of the best examples of a failed joint venture in the communications industry, Redman said. The $1 billion joint venture was created in 1994 by BT Group and MCI in 1994, which dissolved and became a joint venture between BT and AT&T Inc. in 1999. That venture broke down in 2001 and the assets were split between the two companies.
More recently, and more pointedly in the
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