Sprint to sell WiMax service wholesale

Sprint Nextel is a wholesale customer of Clearwire’s WiMax service but will itself become a wholesale provider of the service to other carriers.

The arrangement could open the door to WiMax service under many different types of service and pricing plans aimed at cost-conscious consumers or specific demographic groups. Sprint has long made its 3G EV-DO (Evolution-Data Optimised) network available to MVNOs (mobile virtual network operators) that can give the service their own look and feel or sell it for less than Sprint’s own retail rates, the company said.

For the time being, Sprint is offering the resellers just two devices, which it announced yesterday. One is the HTC Detail 3G/4G handset, which is essentially the same as the HTC Evo Shift 4G, with a 3.6-inch touchscreen, a slide-out QWERTY keyboard and Android 2.2. The other is the Sierra Wireless 250U 3G/4G data card, which works with Windows 7, Vista and XP and Mac OS X. “At some point in the future, Sprint plans to make other devices available for the partners to resell,” Sprint spokesman John Votava said.

Sprint itself is just a reseller of the WiMax service, which is actually delivered by Clearwire.

“The deal announced yesterday was made possible by an agreement under which Sprint will pay Clearwire $1 billion over the next two years for network capacity for its customers,” Votava said. “That arrangement, reached after lengthy negotiations, was announced in April. New Sprint smartphone users pay a special $10-per-month smartphone fee that in part covers the cost of the 4G access, though the fee applies to high 3G data usage too,” Votava said.

“Clearwire also runs a wholesale business, selling services through Best Buy, cable operators and other partners as well as through Sprint. But the new wholesale arrangement with Sprint should actually be good for Clearwire, because Sprint is better able to attract wholesale customers,” said analyst Jack Gold of J. Gold Associates.

“Sprint can offer an MVNO the use of its more widely available 3G network in addition to the 4G infrastructure, which is only in 71 markets around the U.S. As long as Clearwire ultimately gets paid for the smaller carriers’ subscribers using the network, it benefits,” he said.

“If I can make a nickel off your dollar, that’s OK,” Gold said.

“”Sprint’s new wholesale arrangement with hybrid satellite-cellular carrier LightSquared, announced last week, does not allow Sprint to resell LightSquared’s services at wholesale,” Votava said. According to him, however, that detail might change before the startup’s network actually goes live. “LightSquared still needs to build an LTE (Long-Term Evolution) network and earn FCC approval to operate it,” he added.

At least for now, Sprint’s ability to resell WiMax differentiates its relationship with Clearwire from the LightSquared arrangement. “An agreement like this shows the value of Clearwire’s 4G network and the importance of Clearwire to Sprint’s long-term strategy,” said Clearwire spokesman Mike DiGioia.

“Sprint’s wholesale customers can have other 4G devices made to offer their subscribers, but those would need to be approved by Sprint,” Votava said. According to him, this is consistent with other MVNO arrangements. More than other major U.S. carriers, Sprint has long made its network available wholesale to third parties, offering just minutes and data capacity or all aspects of a service, including billing and other back-end functions.

Sprint and Clearwire, which is majority-owned by Sprint, face growing 4G competition from Verizon Wireless and AT&T but continue to gain subscribers for the older WiMax service.

Sprint CEO Dan Hesse said last Thursday that the company had sold 1.7 million 4G devices in the second quarter. Clearwire reported subscriber growth of 1.8 million in the first quarter, reaching a total of 6.15 million, and is due to report its second-quarter results today.

“The impact of Sprint’s new wholesale offering may not be very big,” analyst Gold said, “because the MVNO business has proved difficult for many of the small players that have tried it. Several such carriers shut down in the last decade, and Sprint recently acquired one of its major MVNOs, Virgin Mobile. Profit margins are small and targeting specific communities hasn’t always worked out well,” Gold said. According to Gold, one Sprint wholesale customer, Mitel, is already offering the Sierra Wireless 3G/4G data card to its customers.