Mobile operator Sprint Nextel has now confirmed the report that it will scrap its agreement with Clearwire to jointly build a nationwide high-speed wireless network based on WiMax technology across the US.

"Sprint Nextel and Clearwire have mutually agreed to terminate the Letter of Intent (LOI) signed in July 2007," the operator said in a statement. "The two companies could not resolve complexities associated with the LOI and failed to reach final agreement on the terms of the transaction."

This decision now means that Clearwire will have to spend a lot more money to expand the geographical reach of its own US network. But even worse news for the WiMax camp followed, when Sprint confirmed that it was also "reviewing" its own WiMax network, known as Xohm.

Sprint said it still intended to build a WiMax network as it "remains fully committed to developing WiMax services and deploying a WiMax network."

However, it dropped the bombshell when it said: "In light of this announcement, Sprint is reviewing its WiMax business plans and outlook and the company expects to comment further on these topics early next year."

Sprint had pledged to spend US$5 billion on Xohm by 2010, and the operator said it was still "on track for soft launch (of WiMax services) late this year in the Chicago and Baltimore/Washington markets and commercial launch in 2008."

However it remains to be seen whether Sprint will be able to justify to the markets the massive investment the next generation network needs as it struggles to cut spending and halt subscriber losses. Any decision to cut spending on the WiMax network is bound to have an impact on equipment suppliers such as Samsung Electronics, Motorola, and Nokia and Intel.