The ejection of Sprint Nextel CEO Gary Forsee in October cast a shadow over the carrier's WiMAX plans, although the operator says that it is business as usual. Whatever the firm may say, Forsee's successor will face some tough choices.

After Forsee's departure, on October 8th, Sprint Nextel's board stated that it was in the market for a new CEO from outside the company, implying a fresh start for a firm which has struggled to retain customers in its core business and failed to master the complexities of its $36bn acquisition of Nextel two years ago.

In the same statement that announced Forsee's exit, Sprint revealed that it expects to report a net loss of approximately 337,000 post-paid subscribers for the third quarter of 2007. It also faces demands from the FCC to accelerate its migration from Nextel's iDEN infrastructure.

There is a widespread feeling among the investment community that Forsee and Sprint management were distracted from these fundamentals by the 'Xohm' WiMAX project and that the new CEO will be expected to get Sprint back to basics rather than pressing on with the WiMAX buildout as previously planned.

The mood was summed up by a statement from Fitch Ratings which said: "The company faces significant technology and execution risk surrounding the migration of its iDEN subscriber base to CDMA and the implementation of its WiMAX strategy."

Sprint spokesman John Polivka, however, said that nothing had changed with regard to Xohm.

"Sprint Nextel's Board of Directors remains fully supportive of our WiMAX plans and we are on track with our plans to begin our soft launch phase at the end of this year. We expect commercial launch beginning in spring 2008, and to have 100 million covered pops by the end of next year. In short, it is business as usual for the Xohm organisation," he said.

Asked whether Xohm figurehead Barry West's position as CTO was under review, Polivka reiterated that it was "business as usual" and he would not comment on whether WiMAX was a significant factor in Gary Forsee's departure.

Polivka echoed the point of some commentators who have argued that, in order to recover the ground it is currently losing to competitors, Sprint must capitalise on its unique 2.5GHz assets and the time-to market advantage it will enjoy in the wireless broadband market if it rolls out WiMAX as planned. Furthermore, Sprint must use that 2.5GHz spectrum by 2009, under FCC rules, or face losing the rights to the airwaves.

Whether that market opportunity is compelling enough to warrant the continuation of a strategy that appears unpopular with shareholders is a decision the new CEO will have to make. Activist shareholder Ralph Whitworth, who owns a 1.9 per cent stake in the company, has voiced doubts about spending so much money on a nascent technology when the market for wireless broadband data is itself unproven.

While it may be business as usual while Sprint is looking for a new CEO, once that CEO takes the helm he or she will certainly closely scrutinise the Xohm business model and Sprint's partnership with Clearwire, which has not yet been finalised.

Sprint's inability to successfully migrate all of Nextel's iDEN customers onto its own mobile network was definitely a factor in Forsee's departure and so the new CEO will presumably be tasked with tackling that problem as a first priority.

Consequently the Clearwire partnership, which appears to have stalled in the face of what Polivka calls "complexities" with regard to "geographical market assignments" and "spectrum management", could be put on hold.

Polivka said that he was "not in a position to know the prerogatives" of the new CEO although whoever takes up the post already has plenty of advice from analysts and investors.

"We would expect longer-term initiatives such as the Clearwire WiMAX partnership to be [put] on hold and subject to review by a new leadership team," said Jason Amstrong, a Goldman Sachs analyst, in a note to investors.

Bear Stearns analyst Phil Cusick advised in a note to investors that Sprint should cut its spending for Xohm in half and refocus on its core businesses and predicted that Sprint is "likely to de-emphasise" Xohm, resulting in a slower rollout than promised.

"If we were Sprint's CEO for a day, we wouldn't kill WiMAX, since it could eventually be a competitive advantage. We would re-emphasise the core business... over non-core distractions," Cusick wrote.

Having gone so far down the road with Xohm it seems inconceivable that Sprint could turn back now. Sprint has agreements with Intel, Motorola, Samsung and Nokia Siemens to build out multiple WiMAX networks, not to mention an arrangement with Google to build the Xohm portal. Polivka would not say whether the company could back out of these deals if it wanted to.

However, it seems equally improbable that Sprint can ignore the pressure from investors to re-order its priorities.

Having successfully lined up an impressive ecosystem of technology and content partners behind WiMAX, it appears that Barry West and his team must now convince the Sprint Nextel board, the new CEO, and the financial community that the risk attached to Xohm is one that is still worth taking.

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