With both AT&T and Verizon moving to LTE for 4G cell phone service it is no surprise that Sprint decided to join them. Sprint CEO Dan Hesse said Wednesday morning that the company is in talks with Clearwire to extend its contract past 2012 and use Clearwire to help power Sprint’s LTE network. News of the possible extension has caused Clearwire shares to skyrocket up nearly 20 percent.
Sprint decided to ditch WiMax and focus on LTE for its flavor of 4G technology. Previously Clearwire powered Sprint’s WiMax 4G network, and learned that it would be losing its biggest customer at the end of its current contract. Much like Sprint, AT&T, and Verizon, Clearwire also figured that the future of 4G lay in the hands of LTE, so it decided it would also build a LTE network. If your head is already spinning with all of this cell phone network talk please review our guide that explains all of the 4G options.
This is why Sprint and Clearwire are on talking terms again. Sprint hopes to launch its LTE network by the middle of 2012, and in order to do so it will need all the help it can get. Things start getting a little tricky when the details around the possible contract extension are examined a little closer.
Clearwire publicly announced that it will need around 1 billion dollars to build a LTE network, but Clearwire doesn’t have that kind of money lying around. It is safe to assume that Sprint will help Clearwire with some or most of the billion dollars it needs, in order to use the network at a discounted rate.
So why would Sprint help another company build a LTE network instead of building its own network? The answer is pretty simple in this case, because Sprint is the majority owner of Clearwire. If Clearwire isn’t able to transition from WiMax to LTE then the company will have no future, and Sprint doesn’t want that.