Sprint CEO search throws WiMax plans into question

By Sinead Carew - Analysis

NEW YORK (Reuters) - Whoever becomes Sprint Nextel Corp's (S.N) next CEO, one thing is clear: Wall Street expects the U.S. mobile service provider to scale back its ambitious plans for a next-generation WiMax high-speed network.

Analysts said they are either looking for Sprint to spin off its WiMax assets, perhaps alongside a sale of its long-distance wireline network, or at the very least they are hoping for a reevaluation of its WiMax spending plan.

The No. 3 U.S. mobile service said on Monday it is searching for a new chief executive, after more than a year of customer losses and investor frustration over former CEO Gary Forsee's plan to spend $5 billion by 2010 on WiMax.

Sprint could raise as much as $10 billion by selling its fixed-line network for $4 billion to $5 billion and partially spinning off its WiMax business for $6 billion, UBS analyst John Hodulik estimated in a note to clients.

"As the new CEO, this person is in a unique position, able to take dramatic action to ensure that the company is on the right path for the future," he said. His estimate of the WiMax business is based on the valuation of Clearwire Corp (CLWR.O), which plans to partner with Sprint on WiMax.

WiMax is an emerging technology that promises faster connections over longer distances than Wi-Fi. Intel Corp (INTC.O) is a big promoter of WiMax, with other backers including Nokia (NOK1V.HE), Motorola Inc (MOT.N), Samsung (005930.KS) and Google Inc (GOOG.O).

Sprint has regulatory obligations to build a network using the airwaves it has pegged for WiMax, which would make blanket wireless coverage over a metropolitan area more possible than the current Wi-Fi standard for short distances.

Stanford Group analyst Michael Nelson said Sprint should not spin off WiMax because it gives the company a technological edge over other service providers. But he said Sprint does need to overhaul its strategy.

"I do not believe the company should be broken up. I think Sprint has extremely valuable assets," Nelson said, referring to both WiMax and Sprint's wireline business. "The WiMax strategy probably should be reevaluated in terms of the timing and the amount of capital it's spending."

Nelson said he agreed with Forsee's past objections to a sale of the long-distance network, arguing that it helps Sprint save money by avoiding using rival long-distance services.

Hodulik said potential bidders for the wireline assets could include Verizon Communications Inc (VZ.N), Qwest Communications Inc (Q.N) and Level 3 Communications Inc

(LVLT.O).

WIMAX SALE OR SPIN?

Other analysts say Sprint should get out of WiMax entirely by selling the spectrum it plans to use for the service.

"The fundamental thing is they have too many strategic initiatives. They need to do some rationalization," said Keith Mallinson, founder of wireless consulting group WiseHarbor.