Sprint maintains WiMAX network for 2 nonprofits, may incur up to $225M in costs for overall shutdown

Sprint (NYSE: S) went ahead and shut down its mobile WiMAX network on Friday except in the markets around the country where it was ordered by a judge in Massachusetts to keep it running for two nonprofit groups that are locked in a contract dispute with the carrier. Meanwhile, Sprint disclosed it will incur as much as $225 million in costs related to the shutdown of Clearwire's legacy WiMAX network.

On Thursday, Judge Janet Sanders of Suffolk Superior Court in Boston delayed by 90 days Sprint's shuttering of the WiMAX network in 75 cities across the country. The two nonprofit groups, Mobile Beacon and Mobile Citizen, sued Sprint and sought an emergency injunction, alleging that Sprint violated their contract by pushing them to accept LTE service that would have throttled their customers' speeds after 6 GB of data usage.

The list of cities covered by the order includes many of the largest markets in the country. They include: Atlanta; Boston; Chicago; Dallas; Denver; Honolulu; Indianapolis; Las Vegas; Los Angeles; Miami; Minneapolis-Saint Paul; New York City; Philadelphia; Salt Lake City; San Francisco; and Washington, D.C. According to the court order, the markets also included smaller ones like Anchorage, Alaska; Corpus Christi, Texas; Harrisburg, Pa.; New Haven, Conn.; Syracuse, N.Y.; and Trenton, N.J.

"While we're currently maintaining WiMAX service for Mobile Beacon and Mobile Citizen per the court's decision, as of Nov. 6 we are moving forward with the deactivation of commercial subscribers and the shutdown of their access to the WiMAX network," Sprint spokeswoman Adrienne Norton told FierceWireless. "The network remains operational but we are shutting down virtually all customers except Mobile Beacon and Mobile Citizen."

In a filing with the Securities and Exchange Commission, Sprint said that as a result of ongoing network initiatives and cost cutting, "we may incur future material charges associated with lease and access exit costs, severance, asset impairments, and accelerated depreciation, among others. To date, we have specifically identified exit costs, which are expected to range between approximately $100 million to $225 million, primarily related to ceasing use of WiMAX technology and access exit costs, of which the majority is expected to be incurred by March 31, 2016."

Sprint said it disagreed with the court's decision but that it hopes "Mobile Beacon and Mobile Citizen will take this time to work cooperatively with Sprint to resolve the contract dispute."

"We plan to continue to protect our rights in this contract dispute and expect to prevail on the merits," Sprint said in its statement.

Mobile Beacon and Mobile Citizen filed the lawsuit last month and claim they serve 429 schools, 61 libraries and 1,820 nonprofits that are dependent on the WiMAX service for Internet access. They claim those schools, libraries and nonprofits collectively serve more than 300,000 customers, many of them low-income individuals and families who have relied on WiMAX service for Internet access.

At the heart of the dispute is the changing nature of the service Mobile Beacon and Mobile Citizen will get from Sprint. The lawsuit alleges that its agreements with Clearwire and then with Sprint mean that Sprint needs to provide them with "the best level of service it provides its retail customers," and that Sprint is failing to offer that. 

"Our goal is to ensure that our EBS partners and our subscribers can use Sprint's best 4G LTE advanced broadband services as soon as possible," Sprint said in its statement. "We remain committed to an equitable solution for all parties and are hopeful that Mobile Beacon and Mobile Citizen will work with Sprint in good faith to get their customers transitioned so that they can remain connected."

Katherine Messier, managing director of Mobile Beacon, told FierceWireless last week after the judge's order came down that "the ultimate purpose of that is to give us time to transition our users. Our hope is that this will make Sprint work with us expediently to get that done."

"Hopefully we can have a much more productive and cooperative relationship," Messier added.

For more:
- see this Re/code article
- see this Sprint SEC filing

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