Huawei deal indicates Clearwire is reaching its tipping point

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Huawei deal indicates Clearwire is reaching its tipping point

By CAROLINE GABRIEL

Published: 12 August, 2009

READ MORE: Financial | Huawei Technologies | Clearwire

Clearwire has certainly reached its tipping point, moving from being speculative start-up to fully fledged carrier. It is accelerating build-out and approaching real scale, and a key sign of this scaling-up is the addition of Huawei to the supplier roster.

The announcement came along with Clearwire's financial results and a broader statement of its full list of strategic suppliers. The rest of these were already known and are led by Cisco for core networking and the IP next generation network, as part of a broad ranging alliance that will also cover device development (but does not include the IP giant's own WiMAX access technology, acquired with Navini). The others are base station switching firm Ciena and DragonWave for microwave backhaul (with some of this also coming from Motorola).

The original RAN vendors, Samsung and Motorola, remain in place of course. There was no mention of Nokia Siemens, despite speculation that it would remain involved with Clearwire in some capacity, possibly through its new OEM deal with Alvarion. By contrast, Huawei was initially reported back in March, by The Wall Street Journal, to be bidding for the next phase of Clearwire's build-out. Any breakthrough in the US is important to the Chinese giant, which is gaining market share in almost all other world regions but remains a small player in north America. It will provide Clearwire with base stations, element management system (EMS) components, and related network hardware and software.

On the second quarter results call, CEO Bill Morrow also predicted the tipping point in the second half of this year - one that will be critical to achieve, to instil real confidence that Clearwire can survive the fierce waters of US telecoms. The well respected former Vodafone executive has brought a good dose of that confidence with him, but results will speak even louder, and he said that "fourth quarter net subscriber additions will be higher than all 2009 quarters combined."

That will cheer investors, which have seen Clearwire burn through $646m in cash so far - the carrier predicts cash burn of $1.5bn to $1.9bn for 2009, and had $2.5bn in reserve as of June 30. It plans an increase in capex and an "aggressive" hiring program over the rest of this year. These are tight figures that need to be sweetened with strong subscriber ramp-up, and Morrow is confident this will be delivered, as new markets come online. The company plans to cover 30m people by the end of 2009, while the wholesale partners are just starting to make an impact. He also believes Clearwire could access additional funding, if necessary, to keep its roll-out targets on track. "We are increasingly encouraged about the prospects of finding additional funding on terms favorable to us," Morrow said.

In Q2 figures, Clearwire reported a net loss of $73.4m, or 38 cents a share, on revenue of $63.6m, up 9% on a year ago. Wall Street was expecting a loss of 39 cents a share on revenue of $65.2m. The operator added 12,000 net subscribers to make a total base of 511,000, up from 461,000 a year ago. ARPU was $39.47, virtually unchanged, while churn was up slightly, from 2.6% to 2.8%, and is likely to rise more as the company gains scale. Clearwire has 23.1m points of presence, up from 16.8m a year ago.