Clearwire the industry darling again

Clearwire gets some more funds and suddenly it's the industry darling again.

Last month the mobile WiMAX operator received $1.56 billion from investors including Sprint Nextel and sold more than $2 billion in debt to help fill a funding gap that was a glaring hole in analysts' eyes. And they questioned whether the company could get more money in this economic climate and therefore the operator would fall short of its goal of covering 120 million people by 2010. 

This week, investors are driving Clearwire's stock price up. UBS upgraded its rating from a sell to neutral. And Clearwire says it now has the funds that will enable it to expand its coverage faster, beyond the 120 million people next year.

But another glaring hole remains, and that is the lack of compelling WiMAX devices. Clearwire CEO Bill Morrow said in an interview with mocoNews that the operator will add WiMAX-capable smartphones in the second half of next year. "I wouldn't count on it by summer, but before Christmas," he said.

Market research company Pike & Fischer said Clearwire could face problems growing its customer base because it lacks compelling handheld devices at competitive prices. Clearwire isn't subsidizing the cost of the devices like mobile operators are, which could stunt the operator's growth.

"Clearly, it will be very difficult to drive mass adoption at that price level," said Tim McElgunn, chief analyst for Pike & Fischer's Broadband Advisory Services. "Consumers are accustomed to getting their mobile devices subsidized by the carriers, and may balk at the need to pay full price for a device with relatively limited functionality. Clearwire and its partners face the dual challenge of designing and manufacturing an attractive and usable handheld and quickly driving down the cost," McElgunn added.

That's why Clearwire, I believe, is banking much of its growth on the wholesale subscribers its partners will bring in. Sprint Nextel, Comcast and Time Warner Cable currently offer WiMAX services through partnerships with Clearwire. WiMAX is an important tool for all of these operators, especially the cable operators that are staving off competition from the likes of AT&T and Verizon and their bundled offerings. These players have the marketing muscle, the ability to drive scale and a better ability to heavily subsidize devices down the road.

Morrow told mocoNews that Clearwire is being aggressive in looking to expand its roster of wholesale partners. "We are talking to all of them," Morrow said. "We are talking to carriers, cable operators, phone [landline] companies and satellite. We welcome everyone on ... It's good for Clearwire." During Clearwire's third quarter earnings conference call, Morrow said that the company is "ramping up our systems to be able to support even more wholesale customers."

Right now Clearwire needs to be in the retail business to push along interest in mobile WiMAX, but I wouldn't be surprised if it eventually becomes a wholesale operator after its wholesale business is well established.--Lynnette