Clearwire's losses mount as its build-out plan accelerates
To test LTE in 40MHz channels and for WiMAX coexistence, but no commitment
Published: 5 August, 2010
READ MORE: Financial | US | Clearwire | LTE | WiMAX
Clearwire is racing to hit its coverage targets and maintain the upper hand in US 4G, with Verizon Wireless' LTE launch on the horizon. Clearwire has covered 56m POPs to date but this is less than half of the target of 120m by year end - a target that Verizon Wireless is chasing. This makes it likely that Clearwire will light up its WiMAX networks in some major metros in the last quarter, and the roll-out is weighing heavily on its capex.
With mounting bills, Clearwire reported a widening second quarter loss. Uptake of its services is better than most predicted, but at this early stage, investment in network expansion is bound to outrun revenue growth. The loss was $126m or 61 cents per share, compared to last year's $73m. The results included a loss of nine cents per share for inventory adjustments. Excluding that item, the loss would have been 52 cents per share, in line with analyst expectations. Revenue rose 93% to $122.5m, behind forecasts of $132m.
Clearwire added a net 722,000 subscribers in the quarter, to end at 1.7m. Its base received a significant boost from the launch of the HTC EVO, the US' first WiMAX capable smartphone, by Sprint, which runs its 'Sprint 4G' WiMAX/CDMA service on Clearwire's network (and holds the largest stake in the start-up). The success of the EVO is good for Sprint but has a more limited effect on Clearwire's own financials because many subscribers have taken the HTC superphone even in areas with no WiMAX coverage. The company receives only a "nominal" fee for them, it said.
The WiMAX carrier also followed through on pledges to keep its technology options open, and is to start testing LTE, which it could potentially use in future for new markets, or alongside WiMAX. Any switch would be unlikely to happen until 2012 or later, once the TDD version of LTE has commercial equipment and an ecosystem. Clearwire has only TDD spectrum, although it said it would test an FDD implementation with paired 20MHz channels since it has so much spectrum capacity that it could deploy 40MHz per carrier in many markets.
The same 'options open' approach is being taken by other large carriers like Reliance Infotel in India, putting the pressure on WiMAX to keep its technology ahead of the game, reducing the incentive to migrate to TD-LTE in a future generation.
Clearwire said it would test LTE in its 2.5GHz spectrum using Huawei and Samsung gear. CEO Bill Morrow said the firm was "by no means committing" to deploy commercial LTE in future but it aims to demonstrate to backers that it has flexibility. In particular, it wants to prove that the two technologies can coexist, so that an LTE strategy would not entail a full rip-out of current networks.
"As we have consistently stated we remain technology agnostic," Morrow said on the Q2 earnings call. "If we elect to add LTE to our network at some point we could do so using existing core infrastructure and backhaul."
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