Sprint Nextel Bets on WiMax

Today, Sprint Nextel Corp. announced a move that would change the business model of its wireless operations. On top of selling traditional wireless service to subscribers, the wireless carrier is seeking to give access to the network to other type of products, such as digital cameras and billboards. The early WiMax revenue generated by Sprint will probably come from the subscription model. Longer term, though, the company hopes to make money from advertising. For example, it has a deal with Google Inc. in which more than half of the mobile-advertising revenue from the WiMax network goes to Sprint. It expects to post revenue of $2 billion to $2.5 billion from the network in 2010.

WiMax is a wider-ranging form of Internet access similar to Wi-Fi, but it uses licensed spectrum and is considered more dependable. The company has teamed with Intel Corp., Motorola Inc., Samsung Electronics Co. and Nokia Corp. to release 50 million WiMax products over the next three years, which would boost demand for WiMax services. For instance, Sprint could sell service, either as a one-time fee or regular subscription, that would allow consumers to send photos to their home computer from the camera through the WiMax connection. Nevertheless, the 50 million devices expected over the next three years still are light in comparison to Wi-Fi-enabled devices. Roughly 200 million consumer-electronic devices are expected to carry Wi-Fi chips by 2010, according to ABI Research.

Sprint’s bet will be expensive, about $5 billion through 2010. Its WiMax network, which it calls 4G technology, would pay off by winning new customers. The network won't just benefit Sprint. Fred Wright, who heads up cellular-network products and WiMax for Motorola, said he sees revenue opportunity in providing consumer devices, modems and networking equipment to support WiMax. In the 2010 to 2012 time frame, the market will be worth "billions of billions of dollars," he said.

There is no question that Sprint Nextel needs the help. The wireless carrier has been steadily losing customers over the past several quarters, and only in the recent quarter did it turn itself around. They hope the new brand for the business, Xohm, be powerful enough to put them back on track to compete with AT&T and Verizon Wireless.