Its two years since Clearwire launched its WiMAX network in Portland, Ore., in January 2009 and became the first major operator in the United States to offer next-generation mobile broadband services. It was the first provider of 4G wireless service in Delaware, and now it’s on shaky economic ground. Clearwire and its majority shareholder, Sprint facing major financial woes and imminent competition from Verizon Wireless’ LTE network, and 4G claims from MetroPCS Communications and T-Mobile USA. Clearwire’s financial problems have forced it to cut 600 staffers, delay pieces of its network build and suspend the launch of Clear-branded smartphones.
“Clearwire’s going concern risk disclosure in its 10-Q, rising cash burn, aggressive cost containment actions, wholesale pricing dispute with Sprint, and elevated churn lead us to assign a higher probability to our $1.50 Bear Case; our Base Case is $5.75,” he writes in a brief research note. “We believe risks are increasing that operations deteriorate further and neither Sprint nor other sources significantly fund Clearwire.”
Fresh off the launch of their mobile broadband service in New York,you’d think there might be a little more optimism emanating for their corporate office; their expected number of subscribers by the end of 2010 is upwards around 4 million, which is twice their initial prediction. But the bottom line remains, unless they can secure some additional funding, Clearwire may go quietly into the 4G night. It’s estimated they’ll need to raise $1 billion. In the meantime the WiMax provider has cut 15 percent of its workforce, to stave off more immediate financial ruin.
Clearwire’s ongoing funding woes have exasperated the already-strained relationship between the two companies. Sprint CEO Dan Hesse and two of the company’s top executives resigned from Clearwire’s board of directors in September, reportedly on an “abundance of caution” over antitrust concerns. The companies haven’t reached an agreement over funding and disagree over their retail strategy. The industry is rife with speculation that Sprint wants Clearwire to cut its brick-and-mortar presence to focus on wholesale, but Clearwire doesn’t want to depend on Sprint for new subscribers.
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