Clearwire bets on fourth quarter for WiMax

The company is planning to emerge as 4G service wholesaler with big partners. For now, though, earnings results show Clearwire is in a waiting game.

This was originally posted at ZDNet's Between the Lines.

Clearwire said Tuesday that it expects fourth-quarter net subscriber additions to ramp as it rolls out its 4G WiMax service into more markets. That tipping point will be critical to the company's success--and possibly its survival.

On a conference call with analysts, Clearwire CEO Bill Morrow said that he was pleased with WiMax uptake in new markets such as Las Vegas. Morrow added that "fourth-quarter net subscriber additions will be higher than all 2009 quarters combined."

That's good since Clearwire projected a cash burn of $1.5 billion to $1.9 billion for 2009. So far the company has burned through $646 million (statement). Clearwire had $2.5 billion in cash as of June 30. If the fourth-quarter 4G customers don't roll in, Clearwire may be cutting it close with its cash burn. Morrow and CFO David Sach cited Clearwire's strong balance sheet, but Moody's has it on its "bottom rung" list of companies with weak liquidity.

Clearwire rolled out its Atlanta WiMax service in June and followed up with Las Vegas in July. The company plans to cover 30 million people by the end of 2009 as it launches 4G WiMax services in markets ranging from Philadelphia to Seattle to Maui and Honolulu to various locales in Texas. Clearwire--along with partners Sprint, Comcast, Time Warner Cable, and Google--is betting on WiMax for 4G service while other much larger rivals such as AT&T and Verizon are betting on Long Term Evolution (LTE) networks .

Clearwire is planning to emerge as a 4G service wholesaler with big partners being the key distribution channel.

For now, Clearwire's results show the company is in a waiting game. It's a small wireless provider, facing high churn rates (some related to moves to 4G), and the plan is to leverage the distribution heft of partners such as Sprint.

The company reported a second-quarter net loss of $73.4 million, or 38 cents a share, on revenue of $63.6 million, up 9 percent from a year ago. Wall Street was expecting a loss of 39 cents a share on revenue of $65.2 million. Clearwire shares slid in afterhours trading.

Clearwire executives said the company will be aggressively hiring workers as it rolls out services. Capital spending will also increase in the second half of 2009. The company has big suppliers such as Cisco, Huawei, Motorola, Samsung, and Ciena that can enable Clearwire to cut equipment costs.

By the numbers:

• Clearwire added 12,000 net subscribers in the second quarter for a total base of 511,000, up from 461,000 a year ago.

• Average revenue per unit was $39.47 on par with a year ago.

• The second churn rate was 2.8 percent, up from 2.6 percent a year ago. Clearwire expects churn to continue to trend higher.

• Clearwire has 23.1 million points of presence, up from 16.8 million a year ago.

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About the author

    Larry Dignan is editor in chief of ZDNet and editorial director of CNET's TechRepublic. He has covered the technology and financial-services industries since 1995.

     

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