WiMax firm raises $900 million
With a cash infusion from Intel and Motorola, WiMax start-up Clearwire hopes to start building out its network.
Under the transaction, Intel Capital, which earlier invested in the company, will put $600 million more into Clearwire, the single biggest investment for Intel Capital ever. Meanwhile, Motorola will buy NextNet Wireless, which makes wireless broadband equipment, from Clearwire. Motorola Ventures is also buying a stake in Clearwire.
Additionally, the three companies will cooperate on research, development and deployment. Motorola will sell NextNet equipment to Clearwire, and Intel will concentrate on squeezing WiMax chips into future notebooks.
WiMax is a packet-based technology that transmits data faster than current cellular technology and over longer distances than Wi-Fi gear. Although commercial WiMax offerings are essentially nonexistent these days, 175 trials have been kicked off around the world. Ultimately, WiMax will connect computers to the Internet as well as carry cellular and voice traffic.
"WiMax is coming, whether you want it, like it or don't like it," Motorola CEO Ed Zander said in an interview in May.
The question hanging over WiMax is, who will pay for the equipment to create WiMax networks? Clearwire's $900 million infusion could ease some of that concern.
"Deploying a nationwide network takes a lot of capital," said Sriram Viswanathan, vice president of Intel Capital. Viswanathan said the funds also will be used for customer acquisition and acquiring spectrum.
Clearwire currently offers a service based on a pre-standard version of WiMax with download speeds of up to 1.5Mbps (megabits per second) and upload speeds of up to 256Kbps (kilobits per second). The service ranges in price from $30 to $37 a month.
The company, though, currently concentrates on the technologies based around the IEEE 802.16e-2005 standard. "The economics of standardization are pretty apparent," Viswanathan said.
Clearwire also recently announced a marketing deal with AOL to sell a co-branded service in select markets.
In a Securities and Exchange Commission filing in May, Clearwire said it would use funds from a future initial public offering to expand its network and acquire more radio-frequency spectrum. The Federal Communications Commission is auctioning off slivers of 90MHz radio spectrum in the 1.7GHz to 2.1GHz bands.
Clearwire is likely to bid for some of the 1,122 available licenses. But it could face competition from existing wireless providers.
Clearwire was founded by cell phone pioneer Craig McCaw. It launched its first service in August 2004 and now serves customers in more than 200 cities and towns throughout the world.
McCaw, chairman and co-chief executive of Clearwire, built McCaw Cellular Communications into the first nationwide mobile carrier in the United States. In 1997, he sold the business to AT&T for $11.4 billion. AT&T Wireless was subsequently spun off by the old the AT&T. It was later acquired by Cingular Communications, which was jointly owned by the new AT&T and BellSouth.