Sprint Nextel (NYSE:S) is exploring plans to finance its venture into wireless broadband. The $3 billion WiMax iniative would be a direct competitor to 3G services and has caused concerns among some investors, including Relational Investor's Ralph Whitworth. The activist investor questioned whether or not management's WiMax strategy was worth the extensive upfront costs.

Management's response to these concerns during a recent Bear Stearns conference came in the form of a proposed spin-off of the WiMax unit. Sprint executive suggested that they could spin-off the unit as part of a deal with Mr. McCaw's Clearwire Corporation - a company that is quickly growing in the same niche but not yet profitable. Many investors would favor this deal because it would both remove a potential WiMax competitor and rid Sprint of a potentially risky business.

Other plans to finance the WiMax unit include the involvement of outside financiers to fund the project, including cable companies. After all, Sprint is already involved in a wireless joint venture called Pivot with three other major cable operators. Moreover, Time Warner has reportedly already been in talks with the company regarding the future of WiMax. Other plans include a more standard deal with Clearwire where Sprint may lease technology in an effort to quickly expand its nationwide footprint at relatively low cost.

So, what does this all mean for investors? Well, Sprint executives are finding themselves in a difficult position. They are forced to increase capital spending significantly if they wish to keep WiMax in house, yet they are reluctant to competely separate the company because it could give Sprint an edge over competitors in the future. And with the company already facing criticism over its sluggish cell phone business, this edge could be just what it needs. Unfortunately, the closest comparison we have to estimate the unit's success is Clearwire, whose stock has dropped over 20% since its IPO. Whether or not the strategy pays off remains to be seen, but this is definitely a story to follow in the meantime!

Related Companies
Verizon Communication (VZ)
AT&T Inc. (T)
Qwest Communications (Q)