NEW YORK – Sprint Nextel Corp. (S) said on Tuesday it would spend up to $3 billion over two years to build a high-speed wireless data network using WiMax technology with an aim to increase its revenue with advanced services such as mobile music, video and Web surfing.
Its plans could deal a blow to Qualcomm (QCOM), which bought into a rival technology. The choice comes as the wireless industry tries to fuel growth with new services as phone call prices continue to decline.
Sprint said it would spend about $1 billion on the network in 2007 and between $1.5 billion and $2 billion in 2008. It aims to launch a trial service by the end of 2007, and extend it for as many as 100 million people in 2008.
A source familiar with the plan had said earlier the company could spend between $3.5 billion and $4.5 billion on the network through 2009.
[WiMax network would provide download speeds of between 2 megabits per second and 4 mbps, the Associated Press reported. Those speeds are in the same range as today's typical DSL and cable broadband offerings, but considerably slower than the speeds those providers are starting to offer as they upgrade their networks.]
Sprint also expects WiMax to work in tens of millions of consumer electronics products, from handheld gaming devices to digital music players, in-car entertainment systems and even medical diagnostic devices.
Samsung said it would embed WiMax in everything from TVs and MP3 players to camcorders in 2008. Motorola, which makes TV set-top boxes as well as cellphones, also said it plans to put the technology in its products.
GAIN OR LOSS FOR QUALCOMM?
Samsung, which like Motorola will supply network gear and cellphones, expects to be a major supplier in the project.
"We'll have significant share of Sprint's spend," said Samsung executive Tom Jasny, who added that Samsung would release financial and product information in the coming weeks.
Sprint's Forsee would not break out how much of the $3 billion would go to Samsung, Motorola or Intel and said Sprint was also talking to other suppliers.
Motorola and Intel have long backed WiMax technology. Intel will provide chips for laptops and other WiMax devices.
While Sprint's move could be a setback for Qualcomm, which recently acquired a company that has developed a rival technology to WiMax — Flarion — Qualcomm could yet benefit as it says it holds key patents underlying WiMax.
"We continue to compliment and work with Sprint as a partner on their existing network," Qualcomm marketing executive Jeff Belk said, adding that he believes there are significant challenges to deploying WiMax because it is a nascent technology that has not been widely used.
Sprint had tested Flarion's technology as well as equipment from privately held IPWireless. But analysts had expected the company to choose WiMax as more suppliers back the technology.
The news comes a week after Sprint disappointed Wall Street with weaker than expected earnings and subscriber growth.
Sprint shares fell 1.8 percent to close at $16.63 on the New York Stock Exchange. Qualcomm shares fell 2.1 percent to close at $33.86 on Nasdaq. Motorola shares fell 1.26 percent to finish at $22.81 also on the New York Stock Exchange.