On a year-end financial conference call that left most of the big questions surrounding its business unanswered, nascent national WiMAX provider Clearwire Thursday nevertheless retained a bullish outlook on its ongoing operations, even predicting the possibility of becoming profitable as early as 2012.
While denying rumors that it would close down or cease its retail business, the leading provider of 4G wireless broadband services in the U.S. did say it would emphasize the wholesale side of its business in 2011, while it also slows down network buildouts and scales back retail operations to conserve cash. But even as Clearwire expects to only add a few new rural markets in 2011 the company also predicts it will double its subscriber base from the current 4.4 million to 8.8 million by the end of the year, with most of those additions coming via wholesale deals such as via sales of Sprint’s 4G smartphones, which run on the Clearwire network for their high-speed connection.
Part of Clearwire’s fiscal optimism is based on what the company says is an “imminent” resolution to one of the biggest operational sticking points over the last year, a dispute with majority owner Sprint over the exact amount that Sprint pays Clearwire for each 4G customer. By combining expected increased revenues from the pending new wholesale agreement with the debt financing raised late last year, Clearwire says it has enough cash to get it to a profitable state by 2012, at which point additional funding would become unnecessary.
But even as the company says it can make it on the go-slow path, it isn’t giving up on the possibility of being able to ramp up expansion should some more investment dollars fall into its lap. On the call Thursday Clearwire also said it continues to pursue the possibility of a spectrum auction, where Clearwire would sell or lease some of its excess spectral capacity to raise investment, but does not expect any resolution on such a decision until the end of the second quarter of 2011. An equity investment by Sprint or another investor is also still a possibility, depending on several business factors that include the potential spectrum auction.
According to Clearwire, negotiations about a possible spectrum sale, spectrum lease or any other potential investment slowed during the last few months due to both the ongoing wholesale-fee dispute as well as the debt financing, which made completion of a revenue-raising deal less of a pressing necessity.
“We have built a business to succeed,” claimed Clearwire CEO Bill Morrow, who tried to douse any concerns about his company’s viability or the possibility that Clearwire and majority partner Sprint were still at odds with each other, saying at one point during the call that Sprint and Clearwire “are going to be tied at the hip for quite some time.” Perhaps in part because Clearwire now no longer intends to market its own WiMAX smartphone, Morrow feels confident saying things like, “Dan [Sprint CEO Hesse] and I feel really good about where we’re going.”
The one thing that both CEOs could probably feel good about was the 1.42 million wholesale customers Clearwire added during the fourth quarter of 2010. Though Clearwire doesn’t break out its wholesale numbers by partner, it’s safe to assume that sales of Sprint’s 4G smartphones and portable hotspots make up the lion’s share of the wholesale figures, far outpacing sales from cable partners Comcast and Time-Warner Cable.
Clearwire finished the year with a total of 4.4 million subscribers, with 3.3 million of those from wholesale partners and 1.1 million via Clear-branded retail channels. The 3.3 million wholesale number does carry a bit of an asterisk however since 27 percent of those customers purchased a 4G-enabled device (most likely a Sprint smartphone) in a region that isn’t covered by Clearwire’s 4G services.
Still, even with 900,000 part-time users the Clearwire WiMAX user base of 3.5 million shows healthy growth from 688,000 at the close of 2009, albeit perhaps not at the type of scale that will threaten major cellular providers like Verizon Wireless or AT&T Mobility. But with control of a huge swath of wireless spectrum, Clearwire is also probably not going away anytime soon, especially if its relationship with Sprint is as chummy as Clearwire CEO Morrow says it is.
“The pent-up demand [for mobile bandwidth] is real, and Clearwire has a unique opportunity to capitalize on these trends,” said Morrow on the call. How that happens for Clearwire will be a story to follow as 2011 ticks on.