Clearwire adds more subscribers, cuts losses

Clearwire is gaining subscribers as it expands its network, which is helping it grow revenue and narrow its losses.

Clearwire saw a huge uptick in 4G wireless subscribers in the fourth quarter, which helped the company narrow its losses.

The company, which is building a nationwide 4G wireless network , added 87,000 new subscribers in the fourth quarter, it reported Wednesday. This is up from the 5,000 it signed up in the fourth quarter of 2008. Clearwire ended the year with a total of 688,000 customers.

These subscribers also included wholesale customers, which use the Clearwire service through one of its partners, such as Sprint, Comcast, or Time Warner Cable. Clearwire said that its wholesale subscribers jumped to 46,000 during the quarter.

But as Clearwire signed up new subscribers, it also continued to lose some customers. The company reported that its churn rate or the rate at which people cancel its service jumped to 3.6 percent. Executives blamed the bump in churn mostly to customers who had subscribed to Clearwire's pre-WiMax service canceling their service.

The growing subscriber base helped lower the company's losses. Clearwire reported a loss of $98.7 million, or 55 cents a share in the fourth quarter. During the same period a year ago, it lost about $118 million.

Revenue for the fourth quarter was $79.9 million, up 34 percent, compared with $59.7 million the year before.

Today the company operates in 27 markets, providing access to 4G wireless service to potentially 34 million people in cities such as Chicago, Dallas, Las Vegas, Atlanta, Philadelphia, Seattle, and Honolulu. This year the company plans to offer service in New York, Boston, Washington, D.C., Houston, the San Francisco Bay Area, Denver, Minneapolis, and Kansas City. Executives reiterated plans to reach 120 million in 2010 with its 4G wireless service. And the company plans to triple the number of 4G wireless subscribers in 2010 as it continues to expand its network.

The cost of building this network hasn't been cheap. And Clearwire reported that its costs rose in the quarter. But CEO William Morrow said the company has plenty of cash and will be able to complete its network with current funding levels. Even though the company is in good financial shape to reach its goal, Morrow said he'd consider additional funding if opportunities arise. Clearwire is expected to spend about $2.8 billion to $3.2 billion to continue building its network.

That said, if the company expands beyond current plans, it will need more funding. Clearwire could consider applying for government funding as part of the National Broadband Plan if it decides to go beyond its current plan, executives said during the conference call.

Clearwire is in a race to build out the next-generation wireless infrastructure. Verizon Wireless is already building its 4G network using a technology called LTE, or Long Term Evolution. And other competitors, such as AT&T, are also upgrading their networks with plans to move to 4G in the next couple of years.

While many say that Clearwire's technology of choice, WiMax, will not be as widely deployed as a competing technology called LTE, the company has a major head start over other competitors. It's also backed by big companies, such as Time Warner Cable, Comcast, Google, and Intel.

Clearwire's executives say the demand and appetite for broadband-speed wireless services is already here. And the fact that the company is signing up so many new customers is evidence that people are ready for faster wireless now.

What's more, Clearwire says that it is seeing usage patterns of its service that resemble wired broadband usage instead of 3G wireless services. In other words, consumers are consuming the amount of bandwidth that is available. Most customers are using the 4G WiMax service to provide nomadic access to the Internet. But many are starting to use it as a broadband substitute, subscribing to WiMax alone instead of also subscribing to DSL or cable modem service at home.

 

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