Clearwire’s losses skyrocket, stock climbs: Company in flux

Fresh off a seven-party deal to form a new, and much larger company under its name, Clearwire Corp. reported more than $176 million in losses during the first quarter of the year as it expanded its fixed high-speed wireless network and built up its first mobile WiMAX network in Portland, Ore.
The company’s losses nearly doubled from a year prior, and yet the company’s stock was up almost 4% on the news to $13.24. Clearwire’s stock has dropped from a high of $16.46 it held just before the new deal was announced. Today marks the first significant rebound.
The company netted 48,000 new subscribers during the quarter and ended the quarter with about 443,000 total customers across its domestic and international operations, representing an overall growth rate of 72% from a year ago.
New market launches brought on additional financial losses for the company, yet its revenues jumped 76% from last year’s first quarter, the company said. Churn was up from 1.6% in the year-ago period to 2.2%, as churn in international markets brought up the average. Average revenue per user bumped up from $35.80 to $36.86 year-over-year.
“While our accumulated losses to date are slightly over $1 billion, this pales in comparison to the losses incurred by our wireless predecessors prior to reaching cash flow break-even,” said Perry Satterlee, president and COO, during a conference call. “As most of you know, I was at Nextel [Communications Inc.] and the COO of Nextel Partners [Inc.]. The combination of both companies to build a nationwide footprint had peak negative cash flow estimated at $18 billion.”
Once the new Clearwire deal closes with new investments, Satterlee said nationwide buildout would cost the new company about $2 billion to $2.3 billion total.
“Compare that outlay to the more than $16 billion that our major competitors just spent for new spectrum designated in part for the deployment of a next-generation network, and this is all before a single dollar of [capital expenditures] or [operating expenses] is spent,” she said. “We believe Clearwire represents one of the most cost-efficient nationwide deployments while producing one of the most capable wireless networks to date.”
Indeed, the company’s progress with mobile WiMAX sits high on most peoples’ minds.
During a conference call with investors and analysts, Clearwire VP and CTO John Saw said more than 70% of its WiMAX sites in the Portland area are live or in the process of being built.
“We are also acquiring, developing, and constructing additional sites in our Portland network to cover the remainder of the city and surrounding areas as we move towards a soft launch in Portland later in the year,” he said.
“Once we have soaked in the Portland network for several months, we expect to launch the other three markets,” Saw said. “Before we move to broader nationwide deployment, we intend to launch Atlanta, Las Vegas, and Grand Rapids, each of which will cover different market densities, topographies, demographics, and competitive landscapes, so that we can incorporate the lessons learned into the broader launch of mobile WiMAX in our markets throughout the country.”
CEO Ben Wolff said the deal to combine Clearwire and Sprint Nextel Corp.’s mobile WiMAX business is expected to close during the fourth quarter.