Clearwire Call: New Subscribers Take Backseat As Focus Moves To Mobile WiMax Build-Out


During Clearwire’s (NSDQ: CLWR) Q2 call, CEO Ben Wolff focused on four topics: the company’s pending merger with Sprint’s (NYSE: S) WiMax division; its deployment of mobile WiMax; its decision to slow subscriber growth for its fixed broadband business; and its financial performance. Release. Earnings Call.

On the pending merger with Sprint: Wolff said they are on track to close the merger in Q4, and is still waiting for regulatory approvals and a vote by Clearwire shareholders. Comments with the FCC were due by July 24. More than 100 companies were in support of the merger, and only two oppositions were filed, and one of them said it did not fundamentally oppose the transaction. As for shareholder approval, the documents are well underway, and should be filed with the SEC in the next 30 days. We expect to close in Q4, and we have active discussions with all the parties involved, and they are committed to closing as fast as possible.

Mobile WiMax network deployment: The first four mobile WiMax market are underway. In Q2, the Portland, Ore. grew to cover 1.2 million people. That network reaches peak speeds of 15 mbps with a mean rate of 6 mbps. More than 80 suppliers have more than 400 devices ready for mobile WiMax. The results of their tests in Portland led to the decision to update the existing markets to mobile WiMax faster. Currently, 30 million mobile WiMax POPs are under development (not including markets being built by Sprint). It will continue to sell residential services.

On subscriber growth: We are moderating sales growth to redirect resources to upgrading existing markets more fully (to mobile WiMax), and we now expect to complete all U.S. markets in 2009 as long as the merger completes in Q4. Despite adding about only 18,000 subscribers in Q2, Wolff said it represents 54 percent year over year subscriber growth. By focusing less on subscriber growth, marketing expenditures dropped substantially.

On financial results: Collectively, the U.S. markets are EBITDA positive with Honolulu turning positive during the quarter, and Seattle is on its way. Strong ARPU gains led to higher revenues based on adding additional services, like VoIP.


Why accelerate?: Wolff: “We think we’ve got a great opportunity to deploy the WiMax networks, and to provide an opportunity to upsell them [customers] on other products and services that could increase ARPU and increase stickiness.” Today, Clearwire offers speeds between one and two megabits per second, but with mobile WiMax it will jump to 4 to 6 in the home. Wolff said it can also be done relatively quickly. It can take 12-18 months or more to build a market from scratch, but to do a conversion, it can take 6-12 months. “We can take advantage of the infrastructure we already have.”

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