Sidecut Reports

Big-box retailer Best Buy will resell Clearwire’s 4G WiMAX wireless broadband service under its “Best Buy Connect” brand beginning in 2011, the companies announced today. The deal, versions of which have been rumored almost ever since Clearwire put together its partnership financing deal back in 2008, makes Best Buy the first big-name wholesale partner for Clearwire outside of its core investor group of traditional service providers, a list that includes Sprint Nextel, Comcast and Time-Warner Cable, which all currently resell Clearwire services under their own brands.

“It’s always been a part of Clearwire’s plan to add additional wholesale partners,” said Teresa Elder, president for strategic partnerships and wholesale operations at Clearwire. Best Buy, which recently announced the Best Buy Connect program to resell Sprint’s 3G services, is a potential attractive partner for any broadband service provider simply because of the company’s size and its on-the-ground presence for customers who prefer an in-person purchasing experience.

While pricing and availability details won’t be provided until it gets closer to the planned 2011 availability date, the 4G service will likely mirror the current 3G offering from Best Buy, which includes a mix of plans and options including equipment-discounted deals as well as month-to-month contracts with no early termination fees. Earlier this year, Best Buy, Intel and Clearwire teamed up for a series of WiMAX equipment and service promotions, with discounts for WiMAX-equipped netbooks and laptops purchased alongside long-term contracts for Clearwire service.

Best Buy, Elder said, represents “a different kind of partner” than Clearwire’s existing wholesale resellers, who are all traditional service providers. While the jury is still out on whether or not consumers want to purchase service plans directly from a big-box retailer, having Best Buy promoting WiMAX in all its stores is a win for Clearwire, since any new customer, retail or wholesale, is a boost to Clearwire’s bottom line.

In fact, when Clearwire announces its 2010 second-quarter financial results next week, it is likely that new wholesale subscribers will surpass new Clear-branded retail customers for the first time, mainly because of the sellout success of Sprint’s HTC EVO 4G WiMAX smartphone that went on sale in June. Comcast and Time-Warner Cable have also increased their WiMAX reselling efforts of late, and in the first quarter of 2010 the reseller partners together added 111,000 new subscribers to Clearwire’s network, for a total of 157,000 wholesale subscribers overall.

Still in the future for Clearwire’s wholesale efforts would be a deal with an electronics manufacturer, where Clearwire would provide the back-end connectivity for something like the Amazon Kindle e-Reader, whose connectivity costs are bundled into the content purchase price. Elder said Clearwire continues to talk to multiple potential wholesale partners, since its spectrum position and network capacity give Clearwire the capacity to do so.

“There’s room for lots of partners,” Elder said.

There’s no shortage of media coverage of Sprint’s earnings report from earlier this morning, with the highlight being a sort-of unexpected return to positive net subscriber adds. All in all, it was a pretty good quarter for Sprint, and here we’re going to focus on the comments made about Sprint’s 4G performance, via the WiMAX network services it resells from partner Clearwire.

Though Sprint didn’t break out any exact numbers, its introduction of the first WiMAX smartphone, the HTC EVO 4G, was a big win, with many markets sold out of the device and plenty of positive reviews for the Android-based offering. According to Sprint CEO Dan Hesse, the EVO 4G “exceeded our expectations” on several levels, including not just sales and reviews but in what he called “record” low return numbers for the device.

Hesse also said that HTC EVO 4G users exceed in another category — smartphone data usage. In response to a question later in the call, Hesse said that HTC EVO 4G users consumed “three and a half times more data than our other smartphone customers,” a statistic that reflects Clearwire’s and other operators’ observations that users with more bandwidth tend to use more data.

While some reports have pegged Sprint’s EVO sales at around 300,000, we may get a clearer number when Clearwire reports its numbers next week (since Clearwire will report the exact number of wholesale 4G subscriber gains, of which the EVO customers will be a big part). “We wish we could get more [phones],” Hesse said on the conference call. HTC, Hesse said, is working on the problem presumably as fast as it can. (The call even featured one analyst/fanboy who couldn’t resist telling Hesse that he had just purchased his own EVO 4G, just before complaining about the battery life.)

On pricing, Hesse said in response to a question that the $10 premium fee Sprint was charging for 3G/4G devices like the EVO didn’t seem to slow down any purchase plans. “We could sell a lot more if we had them,” Hesse said. Of the $10 charge, he added, “Customers see the value. I don’t think it’s an impediment.”

While Hesse didn’t supply any information about what Sprint and Clearwire might do with their network beyond the year’s end — he pretty much dodged several questions about Sprint/Clearwire financing and ownership relations — he did say that 4G was a big priority for the remainder of 2010, a year when Sprint, Clearwire and the WiMAX partners will still have the 4G field mainly to themselves. Next on the table for Sprint is the availability and pricing announcement for the already announced second WiMAX smartphone, the Samsung Epic 4G, as well as expected market launches in the “mega markets” of Los Angeles, New York and San Francisco. “Regarding the second half of 2010, 4G will be an increasingly important element of our performance,” Hesse said.

The question came near the end of AT&T’s second-quarter earnings call today, and apparently was too late for many people to notice — but according to AT&T, it has activated somewhere between 400,000 and 500,000 iPad 3G devices, perhaps disproving its own CEO’s contention that most iPad users would stick to Wi-Fi connections.

According to AT&T senior executive vice president and chief financial officer Rick Lindner, Ma Bell was surprised by the amount of interest shown in the iPad by its business customers, especially since big-company CIOs had been reluctant to approve iPhones for corporate purchases when the phone first arrived. Lindner’s findings echoed those found by Apple itself, which talked about enterprise interest during its earnings call earlier this week.

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