Sprint to spinoff XOHM?
The Wall Street Journal reports on the possible new move by Sprint on its WiMax business. The WSJ article, Sprint Weighs WiMax Unit Spinoff – WSJ.com, stated a merger of WiMax operations with Sprint’s partner Clearwire and spinning of the combined operations. Since Sprint is in the process of hiring a new CEO, after Gary Forsee resigned, it is not clear whether the interim CEO can make this move.
On the flip side, with investors unhappy about Sprint’s subscriber churn and revenue growth have already expressed concerns about the $5 billion WiMax investment. So to make the life of new CEO easier Sprint may decide to spinoff XOHM (Sprint’s WiMax brand) before the transition. The candidate CEOs may even ask for this so they can focus on the mobile subscriber growth issue.
The Spinoff is also a better move for the wireless industry and consumers. I say this because of the short term revenue pressures may stifle the long term strategic projects that are needed to capture market share in the post 3G era. When spunoff XOHM can raise equity capital from the market and can fund the rollout without crippling the goals of XOHM. XOHM’s VP Rick Robinson has clearly said that they plan to tear down the traditional walled garden approach, something that isn’t line with the usual thinking of Mobile providers. A separate XOHM will be able to move forward with this “Wireless Democratization” without traditions slowing it down. A clear win for customers.
Current mobile subscriber market is pretty much saturated. I have written before that all “good customers are taken”, and how growth for any single provider can only be engendered by creating churn away from others. While investing in XOHM is the growth right strategy for Sprint its current problems on subscriber side wouldn’t have helped with the aggressive investment needed for XOHM. With new branding, XOHM will be able to shed some of the baggage of traditional telecom provider and will operate in the new realm that has the same brand recognition as Google and Apple.
There is one another outside possibility in all these. Given the saturated market and the high cost of fight for good customers, is Sprint looking for a merger or acqusition with Verizon? It was previously reported that Verizon may be looking to acquire Sprint. That way, spinning off WiMax that doesn’t align with Verizon Wireless’s strategy or the parent Verizon communication’s FiOS strategy makes Sprint an attractive target for Verizon.
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[...] There were speculations about what Sprint may do with XOHM and the rumors that it may spinoff the WiMax unit. Sprint announced today that it is backing out of the venture with ClearWire to rollout a nationwide WiMax network.Here is the link Sprint, ClearWire cancel WiMAX venture. [...]