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Clearwire starts shrinking as Sprint makes the leap to LTE

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It was bound to happen. As Clearwire’s(s clwr) biggest investor and customer Sprint(s s) moved its customers to LTE, Clearwire’s WiMAX subscriber growth would level off and eventually reverse course. Both happened in the second quarter.

After adding half a million new subscribers in the first quarter, Clearwire saw its customer totals dip by 42,000 in the second quarter. It’s not a huge loss, but at this stage of Clearwire’s development it’s one it can’t really afford. With only 11 million connections – the vast majority of them with Sprint – Clearwire needs to keep growing. It needs to demonstrate to its fleeing investors it has market-making potential, and it needs revenues not just for operations but to fund its future LTE network and long-delayed nationwide expansion.

Revenue-wise Clearwire is better off than the subscriber losses would imply. It renegotiated its wholesale contract with Sprint last year to guarantee a minimum of $1 billion in payments into 2013. So even as subscriber losses accelerate as more Sprint customers abandon WiMAX phones, Sprint will continue to pay the 4G carrier. Sprint has also begun selling WiMAX devices through its prepaid brands Virgin Mobile and Boost Mobile, which will help offset those subscriber losses.

Clearwire has been trying to cut its dependence on Sprint by signing other wholesale deals, but for every step forward it seems to take a step back. Partners and investors Time Warner Cable(s twc) and Comcast(s cmsca) have abandoned their plans to resell WiMAX and have instead chosen to partner with Verizon(s vz)(s vod). Clearwire landed mobile virtual network operator (MVNO) deals with Leap Wireless(s leap), NetZero(s untd), Tucows’ Ting and FreedomPop. But Ting and FreedomPop have both indicated that they plan to move over to Sprint’s LTE network when it’s available, so Clearwire only gains temporary relief.

Clearwire’s retail business isn’t faring much better. Of its 11 million total subscriptions, 1.3 million are retail customers, a number that’s held steady for the last several quarters. Clearwire will have to find growth from somewhere or its crisis of confidence will only worsen. Already Google(s goog) and Intel(s intc) have sold their Clearwire shares, and pretty much every one of Clearwire’s original champions, save Sprint, has cut their ties with the suffering operator.

Image courtesy of Shutterstock user Linda Bucklin

3 Responses to “Clearwire starts shrinking as Sprint makes the leap to LTE”

  1. I was a Clear subscriber for about a year. Between the severe throttling, and the fact that they said at the time of sale I wouldn’t be under a contract, and then claimed I was, I’ll have nothing more to do with them, and neither will my friends and family.

  2. Clear may be losing subscribers but it offers two huge benefits to those who subscribe – unlimited data and speed based pricing. You simply won’t find another carrier in the U.S. that allows notebook tethering on 4G the way Clear does, and that’s a BIG differentiator.

    Could they jack up pricing with LTE service to improve their cash flow? It’s very possible, and given the bargain $49.99 pricing of their current top-tier plan, I’d happily pony up more dough for an even faster connection.

    Clear will have problems though if existing subscribers get burned in the transition, either because their current hardware doesn’t get upgraded to work with LTE, or Clear decides to throw the switch to LTE and leave WiMax customers cold. The company is going to have to tread very carefully in the coming months if it intents to keep subscribers.

  3. Robert Syputa, robert at Maravedis com

    The problem stems from the service the ‘4G’ technology network delivers at 2.6GHz: incomplete and low building penetration compared to 3G and 4G using lower frequency bands.

    The way to remedy that is found in the latest LTE-Advanced standards: through use of a combination of macro-cell, micro/femtocell and cooperative and tiered cell networks. This approach can be called HetNet but will evolve into ‘Smart HetNet’ form of ‘true 4G’ in coming years as Qualcomm now calls it.

    The basic problem is that users have not been satisfied with the quality of Clearwire’s BB service. The peak bandwidth is OK. The price is ‘just OK’. But the quality of service has not kept up with the rapid rise in mobile broadband alternatives… namely 3.9G HSPA and similar 3.9G version of LTE. While Clearwire plans to use LTE-Advanced to help fix this, that only goes part of the way in coverage and penetration due to severe capital limitations on deployments. LTE-A is good stuff but it does not walk on water.

    -Robert S.