Clearwire may surprise us all

editor's corner

I think it was a slip on Sprint (NYSE:S) CEO Dan Hesse's part last week during the company's second-quarter results call when, in response to a question, he let it slip that the company added 1.7 million WiMAX subscribers during the quarter.

Sprint has never broken out that number before. Nor has Clearwire (NASDAQ:CLWR), the owner and operator of the network Sprint uses to sell WiMAX service, ever segmented subscriber numbers by wholesale customer. In fact, it hasn't released any subscriber numbers yet because it will announce its quarterly results on Wednesday.

This 1.7 million number is quite impressive given the fact that Verizon Wireless (NYSE:VZ), which is on a full marketing throttle with LTE, added 1.2 million LTE subscribers during the same time period. It's also impressive since the Clearwire-Sprint combo has been touted as one that has already lost the coverage and momentum battle with Verizon.

But Sprint's impressive number got lost in the hype surrounding its announced $9-billion hosting deal with LightSquared, which is aiming to build a nationwide wholesale LTE network. The deal will see LightSquared take advantage of Sprint's new network architecture being deployed via its Network Vision network modernization plan. LightSquared will pay Sprint to deploy and operate a nationwide LTE network that uses LightSquared's L-Band spectrum, and LightSquared will be able to sell network capacity via the arrangement to Sprint, other wireless carriers or retail customers.

So instead of focusing on the stellar WiMAX numbers Hesse dropped during Sprint's conference call, investors pummeled Clearwire's stock because of the LightSquared deal. The stock fell 22 percent to close July 28, the day of the announcement, at $2.15.

I for one will be interested to hear Clearwire's conference call. Based on Hesse's revelation, the operator should report at least a total of 8 million subscribers, up from 6.15 million at the end of the first quarter. Keeping this momentum, Clearwire could very well end the year with between 11 million and 12 million subscribers, exceeding Clearwire's own year-end estimate of 9.5 million subscribers. That's a run rate of about 2 million subscribers a quarter.

That number is feasible given the fact that Sprint is the only major operator that offers unlimited smartphone data access.  When Sprint put the WiMAX-enabled Evo View 4G tablet on sale, it came with data services at a higher usage tier than what the company has been offering for 3G tablet data plans. Those who use WiMAX get access to unlimited WiMAX data but are capped on the company's 3G network.

Moreover, Sprint is attracting more device makers. Motorola Mobility (NYSE:MMI) recently announced its need to diversify with operators. In June the vendor announced that Sprint will launch at least 10 Motorola smartphones by year-end. The flagship device for that effort, the WiMAX-capable Photon, will go on sale this week.

I know Clearwire appears to be the odd man out with Sprint's relationship with LightSquared, but it's also evident that Sprint still needs Clearwire based on the momentum it is now seeing. And of course, the deal with LightSquared is fraught with much uncertainty.

P.S. Check out my latest feature on the Hotspot 2.0 spec, and how it will allow operators to provide Wi-Fi roaming. --Lynnette

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