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Clearwire Goes For $400 Million IPO

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With all the talk about network neutrality, and the buzz around fixed wireless, WiMAX and wireless broadband, it is no surprise that Clearwire is getting ready to cash in. The company started by wireless zen master Craig McCaw has just filed to go public and is looking to raise as much as $400 million. Merrill Lynch, Morgan Stanley, J.P. Morgan Securities, Bear Sterns, and Wachovia Capital Markets are the underwriters. The company has raised nearly $360 million so far from backers that include McCaw, Intel Corp., and Bell Canada.

Clearwire’s decision to tap the public markets underscores the fact that setting up big nationwide WiMAX network in the US is going to be very very expensive. In-Stat, estimates that it would take a total of $3 billion to set-up a national WiMAX network in the US. Clearwire was started back in 2003, and uses pre-WiMAX gear developed by its NextNet Wireless arm to provide download speeds of 1.5 Mbps.

As of March 31, 2006 the company sold its pre-WiMAX wireless service in 27 markets in the US. Clearwire also offers wireless broadband services in 7 regional international markets in Brussels, Belgium and Dublin, Ireland. Clearwire had about 88,000 subscribers (including 11,500 in Belgium and Ireland) at the end of March 2006. It lost about $140 million in 2005, and $33 million in 2004. Revenues in 2004 and 2005 were $15 million and $33 million respectively. The company had 56,200 subscribers to its service in the US as of December 31, 2005 and another 6,100 subs internationally.

Clearwire owns licensed spectrum in the 2.495 to 2.690 GHz band and has the second largest spectrum position in this band after Sprint Nextel. In its filing the company suggests that it has enough spectrum depth to launch its service to an estimated 90 million people. UBS Research in a note to their clients this morning writes, ” … licensed spectrum position is key to the successful deployment of this service and Sprint and Clearwire have an advantage in this area. Both companies have engaged in 2.5 GHz license swaps in the last two years in order to better align their spectrum position. In October 2005, the two companies submitted an application with the FCC seeking approval on a deal that would send Sprint Nextel nine licenses in large markets in return for 61 licenses in primarily small markets to Clearwire.”

If you are pouring through the documents and have interesting thoughts, drop me a note. Otherwise, I will get to it later this evening.

12 Responses to “Clearwire Goes For $400 Million IPO”

  1. Does anybody knows why is clearwire making so huge bet in pre-wimax and implementing right now. How did they get their licenced bands permits?

  2. Tim shampoe

    I work for clearwire and i just wish that if your going to sign up for clearwire sign up through you local sales rep because everytime you sign up over the web or at one of the store like best buy its taking food out of the local guys or gals mouth so please support your local rep.

  3. clearwire in north crolina is a hit with me this is the next generation to wireless internet shame on the cable industry and dial up looking forward to seeing clerwire pn the stock market hope to see the next venture wireless tv

  4. Harry

    Can some of you shed light on what you think Clearwire’s Strategy and how they will make this successful in light of huge competitors with significant resources:

    How will they compete with the quadruple play plans of Verizon, AT&T (Now SBC), and the cable companies at least in the US? Telcos and cable are are upping their speed, bundling and some content.

    Is the Clearwire strategy primary to add subcribers in rural markets (70 %) of US and target certain B2B segments in major metro areas?

    When the 802.16e standard is deployed, what how good will it be and more importantly reliable? How does this compare to any 4g plans of wireless carriers?

    Any possible strategies to partner with the Telcos or Cable companies in utilizing their technology for the last mile connection.

    Wouldn’t services like IPTV/Video etc. present higher quality over Telco/Cable networks?

    What is Clearwire’s competitve advantage? is it just high speed broadband wireless? and will this be enough to dominate a niche of the market?

    What do you think the expected time frame it would take from Clearwire’s 802.16e launch next year to gain significant momentum and mass to warrent an exit strategy? (i.e an acquisition) given technology ramp-up and deployment, subscriber growth etc. 3, 4, 5, or more years?

    Bottom line, if it was your grandmother’s house, would you bet on the Clearwire IPO and invest?

    thanks for any light you can shed.

  5. “Clearwire is actively building. I live blocks from a wealthy neighborhood in Seattle I just got a city permit notice that Clearwire is applying to put a transmitter on a building nearby.
    I don’t think the gentrifying neighborhood I live in is the target, but I will be happy for another choice of broadband.”

    I assume you are talking about Capitol Hill…I live in that building “The Lamplighter” where that equipment is going up.:)

  6. Clearwire’s service would be great for people who are outside DSL or cable areas, but in Ireland, they seem to only cover areas which already have DSL or Cable or both. Plus, they market a 2Mb connection using equipment only capable of 1.5Mb, as well as blocking Skype here, and having a rather oppressive contract. If I had only read it properly I wouldn’t be using their service anymore…

  7. Manish

    Excerpt from the filing…
    Nearly 44% of its subscribers switched from another service provider (DSL or cable modem) with the remaining 56% being first-time broadband subscribers…

    The 44% DSL/Cable broadband cannibalization figure is indeed very impressive considering that fixed/nomadic wireless broadband doesn’t really provide a differentiated offering compared to DSL/Cable. They also claim about 5% household penetration (88000 subs /4.8M covered pop * 2.5 people/HH) and less than 1.2% monthly subsriber churn, which again are enviable numbers. Not to forget they’ve achieved this despite blocking VoIP application from major players which I believe has been major driver for growth of broadband market.

    Based on my research on NextNet’s products, they have a similar product compared to what others vendors in this space like Aperto, Airspan etc offer. The only exception seems to be High power indoor CPE (2W), which provides better Uplink link budgets. I can only attribute this success to competitive pricing or significant DSL coverage holes. I beleive statistics they provide in their filing won’t be scaleable to entire US market.

    IMS research report on predicts <2% share of wireless broadband in residential broadband market. While 2-3% figure seems to be very conservative I feel realistically 6-8% market share might be achievable with some share gains from DSL/Cable and Dial-up. Wireless also has a better reach that more wireline technologies and hence will be faster to reach the unaddressed market which currently is only served by satellite broadband. The market would however be divided between players like AT&T/Bellsouth ( 2.3GHz), Sprint Nextel (2.5GHz) and not to forget our traditional wireless players when LTE becomes available later this decade.

    I still have apprehensions on Clearwire’s success as a wireless broadband player. They definitely seems to have capitalized on first mover advantage but still have lots of challenges including huge capital investment and eventually having to move to standards based technology (although Crag McCaw proved the critics wrong with iDEN)

  8. Peter

    I live in Central Europe and think this service will really work well in the less developed countries where we really need broadband and have difficulty getting decent service at competitive prices. The VoIP application should save enough money itself over the current telco bill to pay for portable broadband, which will eventually become mobile broadband that’s better than 3G.

  9. Duncan

    Clearwire is actively building. I live blocks from a wealthy neighborhood in Seattle I just got a city permit notice that Clearwire is applying to put a transmitter on a building nearby.
    I don’t think the gentrifying neighborhood I live in is the target, but I will be happy for another choice of broadband.