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Clearwire losses widen; build-out, phones stalled

Fri, 02/18/2011 - 7:20am
Maisie Ramsay, Wireless Week

Clearwire's smartphone plans are still on hold, and the company does not plan to expand its WiMAX network into any more major cities this year, Clearwire executives told investors in its fourth-quarter earnings call yesterday.

Clearwire CEO Bill Morrow said the company's efforts to conserve cash would keep the launch of a Clear-branded smartphone on the backburner. The company first announced it was stalling its smartphone plans late last year, when a cash crunch threatened its ability to operate.

The company also announced it would not launch WiMAX services in new metropolitan areas this year if it does not receive additional funding. Clearwire said it must spend $400 million to build out its network in rural areas where it must provide service to avoid having the FCC revoke its spectrum licenses, but it does not plan further expansion beyond minor capacity improvements in cities like New York and San Francisco.

"We're not going to spend a lot in terms of the network this year," Clearwire CFO Erik Prusch said in the company's earnings call, according to a transcript provided by Seeking Alpha.

Clearwire expects its network to cover 130 million people by the end of this year. It currently covers 119 million people in 71 markets, but many of those markets are smaller cities like Grand Rapids, Mich., and Amarillo, Texas. The company is rapidly losing its head-start advantage to Verizon Wireless' LTE network, which launched in December and now covers 39 markets.

The decision to put off a major network expansion until additional funding comes through was announced during the company's fourth-quarter earnings call, when the company reported widening losses but saw a dramatic increase in its customer base.

Clearwire lost $128 million in the fourth quarter on sales of $180.6 million during the fourth quarter of 2010. During the same period in 2009, Clearwire lost $98.7 million on sales of about $80 million. For the full-year 2010, Clearwire lost $487 million on sales of $556.8 million.

The company added 1.5 million new subscribers in the fourth quarter, including 126,000 retail customers and 1.42 million wholesale customers. Clearwire's subscriber base now stands at 4.4 million customers, and the company said it expects to end the year with more than 8.8 million subscribers as its wholesale business drives growth.

Retail ARPU came in at $45.10, and wholesale ARPU dipped to $3.52 due to Clearwire's ongoing dispute with Sprint over wholesale pricing for its smartphone users. Clearwire said it expects to receive "substantial additional wholesale revenue" once the pricing dispute with Sprint is resolved.

Sprint, which owns a majority stake in Clearwire, has disagreed with the company on several issues and did not participate in Clearwire's most recent funding round. Aside from the wholesale dispute, Sprint wants Clearwire to abandon its retail strategy to focus on its wholesale business. Despite reports in The Wall Street Journal earlier this month that Clearwire would shutter its retail stores in favor of wholesale, the company reiterated its plans to expand its brick-and-mortar stores in its earnings announcement.

Clearwire also provided an update on its plans to auction off some of its surplus spectrum to get additional funding for its network build. The company said it was putting off a decision on the spectrum sale until the second quarter of this year as it worked to resolve the wholesale dispute with Sprint.

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