Clearwire (NASDAQ:CLWR) posted record subscriber and revenue growth in the third quarter, but the mobile WiMAX operator said it will take several measures to conserve cash as it seeks to secure new funding. The company said its network now covers 100 million POPs and is on track to cover 120 million POPs by year-end. Clearwire also said it now expects to end the year with 4 million total subscribers, double what it had predicted at the beginning of the year.
However, the company said it is still trying to come up with new funding and is exploring a variety of options. Clearwire CEO Bill Morrow said during the company's earnings call that Clearwire is considering new equity funding from existing shareholders as well as non-strategic investors; debt-based financing; or selling spectrum that the company does not need.
While it searches for new funding, Clearwire is taking a number of measures, which it described as temporary, to conserve cash. The company will:
- substantially reduce sales and marketing,
- delay plans to launch Clear-branded smartphones from Samsung and HTC,
- suspend Clear-branded operations in select markets including Denver and Miami,
- cut the number of contractors it employs as well as 15 percent of its workforce, and
- suspend development activities for cell sites that are not part of its current buildout plan.
Morrow characterized all of these measures as temporary, and said the company is doing this to ensure that once it does secure adequate funding it can quickly ramp up its operations. The measures are expected to save between $100 million and $200 million this year and the same amount in the first half of 2011.
Sprint Nextel (NYSE:S) holds a 54 percent stake in Clearer and resells its service under the Sprint 4G brand. A Sprint spokeswoman, Cristi Allen said that Sprint is going ahead with Sprint 4G launches in Denver and Miami. She declined to comment on Clearwire's funding, other than to reiterate what CEO Dan Hesse said last month: Sprint has been holding discussions with Clearwire about the company's finances, but there is no assurance that there will be any transaction with Clearwire.
Here is a breakdown of Clearwire's key quarterly metrics:
Financials: Clearwire notched total revenue of $147 million, a 114 percent increase over the $68.8 million it had in the third quarter of 2009. The company said its revenue is still primarily generated through its retail business, but said it expects wholesale revenue will increase significantly in future quarters. However, the company reported a wider net loss of $139.4 million, wider than the $82.4 million it had in the year-ago period.
Subscribers: Clearwire ended the third quarter with 2.84 million total subscribers, including 1.01 million retail subscribers and 1.83 million wholesale subscribers. The company said this is the first time the number of subscribers in its wholesale subscriber base surpassed that of its retail business. During the third quarter, Clearwire added 1.23 million total net new subscribers, including 150,000 retail additions and 1.1 million wholesale additions. The company said the sharp uptick is likely due to the fact that more wholesale subscribers are using 3G/4G devices in areas where the Clearwire has not yet launched WiMAX service (a likely allusion to Sprint's 3G/4G handsets, the HTC Evo and Samsung Epic). At the end of the quarter, around 45 percent of Clearwire's wholesale subscribers lived outside of the company's launched markets.
ARPU: The company said retail average revenue per user came in at $42.74, up from $39.71 in the year-ago quarter. The company also started breaking out consolidated ARPU, consisting of wholesale and retail: wholesale ARPU was $4.46 and consolidated ARPU was $21.19.
Churn: Retail churn was 3.5 percent in the quarter, up from 3.1 percent in the year-ago period. Wholesale churn was 1.3 percent and consolidated churn was 2.3 percent.
CPGA: Clearwire said consolidated cost per gross addition dropped to $92, down from $112 in the second quarter and $293 in the first quarter.
- see this release
- see this FierceWireless Q3 earnings page
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