Few companies can’t wait for “tomorrow” as much as Clearwire, which released third quarter results late yesterday highlighting the fact that come this time next year things should be better. Those better days will include the planned launch of TD-LTE services using the carrier’s extensive spectrum holdings, and perhaps a new owner.
“Clearwire’s unmatched spectrum assets and focus on serving major population centers will be the foundation on which we will build a critical 4G LTE network positioned to serve the needs of the industry and the rapidly growing base of 4G customers across the country,” said Erik Prusch, Clearwire’s president and CEO. Please take note of the “will be” portion of that statement.
As for the here and now? Well, Clearwire is still in operation, and in fact continues to serve 10.5 million customers across its WiMAX network, which covers some 130-plus million potential customers. Most of those customers are linked through partner and recently emboldened majority owner Sprint Nextel through millions of WiMAX-embedded devices on the market. Sure, Sprint Nextel has stopped selling those devices through its retail operations, shuffling them off to its prepaid units, but they are still out there … for now.
Clearwire reported that while it ended the third quarter of this year with 1 million more customers than it had at this time last year, it had lost 468,000 customers during the most recent quarter. All of those losses came from its wholesale operations that are dominated by Sprint Nextel, with Clearwire noting it managed to add 21,000 customers through its retail operations. That increase came despite a year-over-year uptick in retail churn from 4.2% to 5.1%.
The increased customer turnover was connected to recently launched prepaid plans that did have the benefit of lowering retail acquisition costs for the company, which plummeted from $288 during the third quarter of 2011 to $191 this year. However, those customers also spent less during the quarter, with average revenue per user dropping nearly $2 to $45.06.
Changes to Clearwire’s wholesale operations impacted revenues, which dropped nearly $20 million year-over-year to $313.9 million during the third quarter. Clearwire noted that its wholesale revenues are now subject to the fixed terms it reached with Sprint Nextel in regards to its WiMAX offering.
With revenues declining, Clearwire managed to trim costs with operating expenses falling from $731.3 million during the third quarter of 2011 to $646.9 million this year. This helped improve net losses from a loss of $399 million during the third quarter of 2011 to a loss of $332.9 million this year.
The carrier noted that capital expenditures during the quarter actually doubled year-over-year to $34 million, though the carrier slashed full-year capex spending from between $350 to $400 million to between $125 and $175 million. Clearwire added that at the end of the third quarter it had $1.2 billion in cash on hand while spending just $26 million during the quarter.
Analysts were understanding in why Clearwire decided to slash capex as it looks to conserve cash ahead of its planned LTE launch, but noted that Clearwire and its network partners were playing a dangerous game of “chicken.” Those partners include majority owner Sprint Nextel and potentially Japan’s Softbank, which recently announced plans to acquire a controlling stake in Sprint Nextel.
“Although we understand [Clearwire’s] rationale for delaying the capex spend, it is our understanding that [Clearwire’s] large partners are not going to ‘believe it until they see it,’ and are unlikely to provide further cash injections until [Clearwire] has working LTE sites,” noted Macquarie Equities Research in a report.
Clearwire mentioned during its conference call that it was also curtailing plans for LTE tower deployments from its previous guidance of 8,000 towers by mid-2013 to just 2,000 towers. The carrier added that it still expected to have vendor financing in place to help fund its LTE deployment.
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