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Sprint's Big Pipe Dream

A huge bet on WiMax could make or break the struggling telco.

Updated from 7:09 a.m.


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condition looks so dismal that an all-or-nothing bet on an unproven wireless technology is actually shaping up as a bright spot.

Tuning out the static surrounding its repeated stumbles, Sprint late last month announced a major expansion of its wireless broadband project. After originally targeting Chicago and Baltimore, Sprint now says it will launch the so-called 4G service in 17 additional cities by the end of 2008.

Sprint has budgeted about $2.75 billion for the effort, effectively doubling down on a not-yet-standardized wireless format known as mobile Worldwide Interoperability of Microwave Access, or WiMax. Theoretically, the new network will soon deliver the sort of speedy mobile Internet connections that people now enjoy at their desktops.

The bold 4G strategy would give the No. 3 wireless shop at least a one-year lead on telcos like


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, and help Sprint stand out from the broadband pack that includes cable giants


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"WiMax is our future," says one Sprint insider who is involved with the decision. "There's no margin for error. It's not like we can say 'we gave it our best effort' and then move on."

Sprint has enlisted tech titans





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to provide the network equipment and the devices that will work with the mobile WiMax systems. Using licensed spectrum in the 2.5 gigahertz range, Sprint will have the ability to eventually cover about 90% of the U.S. markets, say analysts.

One outfit, wireless network design consultant

LCC International


, has landed a plum role in the expansion-planning effort, say people close to the companies. This 4G pioneering work with Sprint could mark a huge opportunity as more network operators look for help, say investors.

But Sprint's wireless pipe dream faces some immediate challenges from its deteriorating business.

Analysts and industry insiders say the Reston, Va., telco has taken its eye off some of the more pressing priorities. The company's integration of Nextel into the Sprint organization has been poor to date, say observers. Nextel's prized two-way walkie-talkie network was

neglected and customers, including at least one federal agency, responded by dropping the service.

Field sales representatives for Verizon and AT&T say Sprint has become a much smaller presence in the business services market. In fact, the overall marketing effort seemed slightly scattershot, with different messages for different customers.

Sprint has only recently decided to unify its marketing theme, changing ad agencies last week.

The neglect was reflected in the numbers.

Sprint posted four consecutive quarters of financial disappointment. The company capped off that performance by getting handed a

stunning decision by the federal contracting agency that it would be banned from seeking government business for 10 years.

Rivals Verizon, AT&T and



made the cut and are now approved to seek an estimated $20 billion worth of telecom work with the feds.

"We are very committed to the Federal business and will continue to serve our current customers through a number of existing contractual platforms," writes a Sprint rep. "In addition, we also have the FTS2001 Bridge contract which allows us to potentially serve our existing customers for up to the next 40 months. We are continuing to focus on our core business and delivering the service/products our customers need and have come to rely on us."

Last week, Sprint got a debriefing from the General Services Administration on why it failed and where it fell down.

But industry watchers say the mismanagement and pileup of financial woes may derail the WiMax effort.

Sprint's chief executive and WiMax architect, Gary Forsee, may not last long if investors start to wonder who's to blame for the 27% stock slide they've seen over the past year. AT&T is up 45% and Verizon has gained 10% during the same period.

Private equity firms have shown an interest in Sprint as the blunders intensify. If the company gets bought out, it's probably fair to assume that the business model and management will have to change to please a new master.

An expensive technology expansion like WiMax may not fit the needs of a private equity shop looking to maximize cash flow.

For now, however, Sprint's hoped-for revival rides on the success of WiMax.

"I'd say if you asked anyone at the executive level, they'd say WiMax is one of our most important initiatives," says the Sprint strategist.

If you are Sprint, it's probably somewhat comforting to have something hopeful to focus on.