Nokia Likely to Partner with Sprint on WiMax
Wednesday January 3, 5:12 pm ET
By the BullMarket.com Staff
Sprint Nextel (NYSE: S - News) is continuing to flesh out its plans for its next-generation WiMax network according to a report published over the long weekend. The company had already announced that it will use network equipment from Motorola (NYSE: MOT - News) and Samsung Electronics as part of its buildout, but it now looks like Nokia (NYSE: NOK - News) will be on board as well, beating out hopefuls that included Alcatel-Lucent (NYSE: ALU - News) and Nortel Networks (NYSE: NT - News). As with Sprint's deals with Motorola and Samsung, Nokia will likely make an investment in the venture. The addition of Nokia, which could be officially announced this week, also means that Sprint will be doing business with the world's top-three handset manufacturers.
The Wall Street Journal report also included some skepticism of Sprint's WiMax plans. The chief concern is that the network, set to test in a few markets at the end of this year before rolling out in 2008, will be the first of its kind, and that therefore Sprint will be under pressure to avoid any initial bumps in the road in order for its $3 billion investment to pay off.
Nonetheless, our view is that Sprint's WiMax strategy is one of the things that sets it apart from its competitors. As we have noted in the past, while the costs associated with the network are potentially very big, the WiMax opportunity is about pervasive, game-changing communications between and amongst phones, and almost all other types of electronic devices.
Aside from the promise of its WiMax plans, we also like Sprint for its limited downside, as it is protected by the EBITDA it generates and by the strategic value of its spectrum holdings. These factors, along with the potential for improvements in operations, should provide tailwinds for the stock in 2007.
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