Clearwire’s executives say they are
continuing to evaluate selling off spectrum or partnering with another company
after losing both wholesale and retail customers in the third quarter.
The WiMAX provider has considered a sale
of its considerable spectrum licenses for years as a means of staying afloat,
but has so far been able to avoid such a transaction by raising debt and
financing from investors like Sprint, its largest shareholder and biggest
But with Sprint set to stop using Clearwire’s
WiMAX service in its smartphones and revenue from other wholesale customers
only now starting to trickle in, Clearwire is under renewed pressure to come up
with a long-term solution to sustaining its business.
President and CEO Erik Prusch said
during an earnings call with investors that the company was in “active
discussions with various parties who are interested in leveraging our
Conceding that investors are
“anxious for additional details,” Prusch said, “while we have a
sense of urgency in arriving at a strategic solution, we also believe our
strong cash position provides us runway to be patient enough to strike not just
any deal, but the right deal or set of deals for the company and its
When asked by BTIG Research analyst
Walter Piecyk whether “strategic transactions” meant wholesale deals
that would include an equity investment or loan, Prusch said, “we’re
looking at more complex transactions… encompassing more than just a wholesale
Clearwire has enough cash on hand to
keep itself afloat for “at least the next 12 months,” CFO Hope
Cochran said. The company had $1.2 billion in cash on hand at the end of the
second quarter, she said.
Clearwire lost 41,000 net customers
during the second quarter, a rarity for the company. The decline included a
loss of 34,000 wholesale customers and 8,000 retail customers.
“We expect the wholesale subscriber
base to decline in the balance of the year as an increasing number of Sprint’s
new customers and those coming off contracts may choose non-WiMAX devices,
including the iPhone and LTE devices, which they have recently begun
marketing,” Cochran said.
Since Sprint is currently paying a fixed
rate for access to Clearwire’s WiMAX network through 2015, the company is
buffered from the decline in wholesale customers, the vast majority of whom are
The company managed to slash its losses
by nearly two-thirds despite a slight decline in sales. Operating losses came
in at $311 million, compared to losses of $911.6 million during the same period
last year. Revenue slipped to $317 million, from $322.6 million last year.
Prusch stressed the value of Clearwire’s
spectrum holdings repeatedly during the call. The company holds a massive 160
MHz of spectrum in the 2.6 GHz band in the country’s top 100 markets. It plans
to use the asset for a TD-LTE network that will provide supplemental capacity
to spectrum-constrained operators. Sprint and Leap Wireless International have
already signed up for the service, set to launch next year.
“We believe our future network
deployment will bring realization of the true measure of value of future
wireless networks, deep capacity resources,” Prusch said. “Our
spectrum advantage will enable continued unlimited usage offers at a lower cost
per bit than competing networks. This will be a significant competitive
advantage for Clearwire, and ultimately, for our wholesale partners.”
Clearwire is in the process of buying
equipment for its TD-LTE network and plans to have the first 5,000 sites on-air
by the middle of next year. It has given its vendors notices to proceed on
1,800 sites, Prusch said.
“Due to the fixed nature of our
WiMAX agreement with Sprint, wholesale subscriber performance has become
increasingly irrelevant having no material impact on wholesale revenue in the
near term,” Cochran said.
Clearwire is working to offset the
impact of Sprint’s impending departure from its WiMAX network by bringing on
new wholesale customers. It has completed the on-boarding process with one
MVNO, Simplexity, and announced a new wholesale agreement with Jolt last
quarter. Clearwire currently has wholesale contracts with 10 companies, Prusch