At an investor conference this morning, Sprint CFO Joe Euteneuer said WiMAX partner Clearwire had “wasted” money in its early years as a company.
“The bad news is a lot of money got wasted in the early years of Clearwire,” Euteneuer said at Barclays Capital Global Communications, Media, and Technology Conference in New York City on Tuesday.
Sprint, which holds a 54 percent stake in Clearwire, has repeatedly clashed with the WiMAX operator on issues from its retail strategy to funding.
Sprint, which sells Clearwire’s WiMAX service under its own brand, is dependent on the operator for its 4G strategy. Clearwire, in turn, is heavily dependent on wholesale revenue from Sprint’s smartphone subscribers and mobile broadband customers.
The two companies only recently settled a long-standing dispute over wholesale pricing for Sprint’s smartphone customers.
Euteneuer, who has only been in his post at Sprint for seven weeks, said he questioned why it took Clearwire so long to resolve the pricing spat with Sprint.
“Being the outside guy looking in and seeing what was going on with Clearwire, it was amazing they were so off course and now leveraging one of their largest shareholders,” Euteneur said.
A Clearwire spokesman declined to respond directly to Euteneuer’s remarks, but said the company maintained a “strong and supportive relationship” with Sprint.
More than two-thirds of Clearwire’s subscriber base is comprised of wholesale customers, the majority of which come from Sprint. Clearwire had 1.3 million retail customers and 4.8 million wholesale customers at the end of the first quarter.
Sprint and Clearwire settled their prolonged fight over wholesale pricing for Sprint’s data-hungry smartphone users last month, just two weeks after Euteneuer, former finance chief at Qwest Communications, took his post.
Sprint agreed to pay more than $1 billion to Clearwire over the next 18 months for its customers’ use of Clearwire’s WiMAX network. Sprint also agreed to pay Clearwire $28 million in back payments.
The influx of cash should help Clearwire address its precarious financial position. Clearwire burned through capital to build out its WiMAX network and hasn’t managed to keep revenue in pace with expenses despite steady growth in its customer base. Clearwire’s net loss more than doubled in the first quarter to $267 million, compared to a net loss of $94.1 million during the same period last year.
The company has laid off about a thousand employees, scaled back on its more costly brick-and-mortar stores in favor of online sales, indefinitely delayed plans for a Clear-branded smartphone and limited the expansion of its WiMAX network to markets where it has to deploy to retain its spectrum licenses.
Clearwire’s cash conservation efforts will allow it to function for the next year without additional funding, allowing it to shelve plans to sell off surplus spectrum to finance its business.
Meanwhile, Sprint is grappling with its own financial problems. The company is working to stem losses, retain customers amid competition from the iPhone at AT&T and Verizon Wireless, and it is spending up to $5 billion to upgrade its aging legacy network with new equipment and a CDMA-based push-to-talk service.
Euteneuer was optimistic about Sprint’s financial future, saying the company is “out of survival mode” and is in a “transition mode to sustainability.”
The company also has “a number of tests going on in different markets” to reduce churn, Euteneuer said, but did not elaborate on Sprint’s plans.
