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Summary:

Today the Wall Street Journal finally got around to pointing out that Clearwire’s plans to build out its Clear WiMAX network would likely be affected by the tight credit markets — something we first brought up in October. At that time, Clearwire said if needed, it […]

logo_notag1Today the Wall Street Journal finally got around to pointing out that Clearwire’s plans to build out its Clear WiMAX network would likely be affected by the tight credit markets — something we first brought up in October. At that time, Clearwire said if needed, it could draw out the timing on its network build-out if it could not raise money at reasonable rates, an option Clearwire CEO Ben Wolff reiterated to us when we spoke with him earlier this month. The company said it has to raise up to $2.3 billion to cover the gap between the costs of its nationwide WiMAX build-out and the $3.2 billion invested in the venture by Google and cable companies. Others have put that gap at $5 billion.

However Chris King, an analyst from investment bank Stifel Nicolaus, says that if it does choose to wait, Clearwire could lose out on its 4G first mover’s advantage. It might, depending on how quickly other carriers move to LTE,  although Clearwire will likely have a price advantage over LTE services, much like it has an advantage over 3G cellular data plans today. But that price competitiveness comes at a steep cost to Clearwire, as King doesn’t expect the company to make a profit until 2015.

  1. Clearwire has plenty of money. The Portland, Chicago, Dallas, Atlanta, and Las Vegas networks are essentially already built. Sure they will eventually need more funding, but they have a long way to go. Pickybacking off of Sprint’s 3G network by offering dual-mode devices will only help drive subscribers.

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  2. How about the positives! Interest rates are at all time lows.

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  3. For some reason it appears to me there is a concerted attack on Clearwire & Sprint lately. BusinessWeek, WSJ, etc. Makes me think someone is concerned about the 4G deployment pulling their customers away.

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  4. [...] problem, of course, is that delays the company’s profits considerably — according to one analyst, all the way until 2015. Related [...]

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  5. Just wondering — what if Clearwire, like other carriers, gets some federal bailout money? Compared to what’s being asked for from Detroit, an extra $3 billion to build out a third pipe seems like small potatoes. And Clearwire has pretty good political support these days. Just wondering.

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  6. A billion here, a billion there. Cash is king.

    Can they do it? I hope so.

    Will the incumbent carriers and cable operators stand idly by? No way.

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  7. Stacey,

    You have a typo:

    “$3.2 million invested in the venture by Google and cable companies”

    That should be billion with a B

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    1. Stacey Higginbotham Wednesday, December 17, 2008

      Ross, thanks. Fixed.

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  8. Stacey Higginbotham Wednesday, December 17, 2008

    Carl, Clearwire’s existing markets are pre-WiMAX and will need an upgrade.

    Paul, if the government gave money for this, then there would be all sorts of conditions is my bet. Filtered Wi-MAX anyone? Conditions on when and where it’s deployed? Given that other private comapnies have invested such a shift midstream seems kind of unfeasible. But politics doesn’t have to make sense I suppose.

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  9. @ Stacey — The markets that Carl referred to are the new mobile WiMAX (802.16m) markets thus no retrofitting is needed. Surely, there are pre-WiMAX markets but they are mostly in rural areas. The new metro-oriented build’s should create market momentum more quickly.

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  10. I think people are forgetting that buildout costs are only one part of the picture. The operational expense of a nationwide network is substantial, at least $1B/year. Then there are the costs of acquiring customers, both marketing and device subsidization. Those costs could easily add up to $5B in the first 3 years. I would expect launching a national wireless broadband network to burn through at least $10B in the first 3 years (I’m not counting the cost to acquire spectrum either), likely a lot more. This is why only encumbents are willing to spend big money on spectrum auctions — those billions are just a drop in the bucket compared to what it costs to be a real competitor.

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