Clearwire turns over network management to Ericsson in 7-year deal

Clearwire Corp. (CLWR) said L.M. Ericsson (ERIC) will manage its network in a seven-year deal, following in partner Sprint Nextel Corp.’s (S) decision to let Ericsson manage its network in 2009. The value of the contract was not announced. Clearwire stock was up more than 3% in early trading this morning.
Clearwire said the outsourcing deal will allow it to reduce operating costs. Funding has been an important component of the WiMAX operator’s business plan as it faces increased competition from larger operators with deeper pockets that are also rolling out 4G services.
“Clearwire’s effort to reduce costs and maximize efficiency while delivering a high quality mobile broadband service to our customers extends to all parts of our business,” said Erik Prusch, Clearwire’s COO. “By engaging Ericsson, a proven leader in managed network services, we can achieve those objectives, and benefit from their extensive global expertise and best-practices developed while serving clients around the world.”
Clearwire will keep its network assets, but 700 Clearwire employees are expected to become Ericsson employees my mid-year. Ericsson, which has about 1,000 open positions in North America today, is increasing its North American presence with the deal. North America became Ericsson’s largest market following the Sprint outsourcing deal, when more than 6,000 Sprint Nextel employees became Ericsson employees.
Ericsson will be in charge of network engineering, operations and maintenance, including field services, 24×7 network monitoring, end-to-end engineering, provisioning and routine maintenance.
Ericsson’s deal with Sprint Nextel, which is Clearwire’s largest shareholder, was touted as a way for Sprint Nextel to concentrate on customer-facing initiatives, leaving network management to Ericsson. Ericsson said it has invested more than $1 billion in state-of-the art tools, processes and global best practices.
Speaking at PCIA 2009, Ericsson’s Johan Bjorklund, VP of managed services for Ericsson North America, said that changing the cultural relationship from personnel who were once colleagues and now vendor and client is something that will take some adjustment as the new organization transforms to one now focused on services-oriented culture. Bjorklund uses the analogy of cooking for your family, where maybe you can be a little messy, to cooking in a restaurant, where a commercial service is rendered in exchange for cash. The arrangement between Sprint Nextel and Ericsson is much more a partnership than a typical vendor/customer relationship, Bjorklund said at the time. “This is a seven-year marriage,” and one Ericsson hopes continues beyond the seven-year deal. “The partnership always has a tremendous emphasis.”
North American operators have lagged behind their global counterparts in letting telecom equipment manufacturers manage their networks, but the move is underway across the globe.