Clearwire beats forecasts in run-up to Verizon showdown
Gains handsets and technology flexibility, but summer will be about smaller markets
Published: 6 May, 2010
Clearwire's results were on track for a company with an ambitious roll-out plan, as it seeks to build up steam ahead of Verizon Wireless' LTE launches late this year. It reported far better subscriber growth than analysts had expected, adding 283,000 net new users, to reach a total of 971,000. Even its losses, though widened from $71m in the year-ago quarter to $94.1m or 47 cents per share, were ahead of consensus forecasts of 51 cents.
Revenues were up 72% year-on-year to $106.7m, also ahead of admittedly modest expectations, in the first quarter, building on strong subscriber growth as the firm added a string of new markets for its WiMAX services, and as its main MVNO investors - Sprint Nextel, Comcast and Time Warner Cable - also expanded their offerings. In its three oldest WiMAX markets, it reported 47% gross margin and 2.7% penetration, and said it took about 18 months to reach profitability.
Strong customer growth and under-control losses are the base requirement for a new telco, but of more interest are Clearwire's future plans and its ability to sustain its progress once it has mobile broadband competition. To this end, it stressed its accelerating roll-out plan, though some observers are concerned that the first half of the year - when it still has the chance to be the only 4G carrier - focuses mainly on smaller cities, many being upgraded from the original Clearwire's proprietary network. Big population and hi-tech centers like San Francisco and Verizon capital New York will have to wait until later this year or 2011. Clearwire said it would add 18 new cities to its list this summer and reach 120m POPs by year end, up from 32 markets and almost 50m people now.
Also boosting confidence in Clearwire's strategy is a richer device plan, as it promised handsets to add to its existing notebooks, dongles and personal routers. Like Sprint, it will launch the US' first WiMAX/CDMA smartphone, the big hitting HTC EVO, though its killer weapon may well still be its Clearpoint personal hotspot, which allows a WiMAX connection to be shared between several Wi-Fi devices (Sprint offers the similar Overdrive). These products are being heavily marketed as a way to get true broadband backhaul for mobile gadgets such as the Wi-Fi Apple iPad - tapping into a trend for users to opt for Wi-Fi media devices over sometimes expensive or restrictive 3G options.
Another announcement on the results call will help to boost investor confidence. Clearwire said it had revised the terms of its investor agreement with Intel, which previously committed it to use WiMAX technology only at least until November 28 2011. It can now introduce another technology with just 30 days' notice. This sparked renewed speculation that the carrier would base future strategies on the other main TDD platform, TD-LTE, as this becomes commercial - perhaps engaging in a long rumored technology and roaming alliance with TD-LTE's greatest supporter, China Mobile.
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