Clearwire's success hinges on wholesale offerings

As Clearwire rolls out its mobile WiMAX network in existing and new markets and intentionally pulls back on its marketing activities in its 50 pre-WiMAX markets, subscriber additions are falling rather dramatically. But CEO William Morrow is confident that Clearwire's fourth-quarter subscriber numbers will exceed all other 2009 quarters combined.

Can he be believed? The operator reported just 12,000 subscriber additions in the second quarter, compared with 25,000 in the first quarter. Clearwire posted a $73 million loss on revenue of $64 million and churn spiked to 2.8 percent from 2.6 percent the previous year. Investors didn't like it. The stock fell last week and was down almost 5 percent to $6.61 a share when it closed on Friday.

Clearwire basically only marketed service in Portland, Ore., during the quarter, since it launched mobile WiMAX at the beginning of June (about two weeks before the end of the second quarter) in Las Vegas and in Atlanta. While executives said they were pleased with the uptake of the new mobile WiMAX service, we just don't know what the progress is yet. Certainly it would just be nice to know how many of those 12,000 subscribers added were mobile WiMAX customers vs. pre-WiMAX customers so we can judge for ourselves. Apparently, Clearwire won't be breaking those numbers out any time soon.

In order to hit the jackpot in the fourth quarter, Clearwire needs two critical things to happen: smooth rollouts in major markets like Chicago, Philadelphia and Dallas (the operator intends to roll out a total of 25 markets--many of them smaller markets already served by the company's pre-WiMAX service--by the end of 2009) and successful offerings from its wholesale partners.

Fortunately for Clearwire, both Sprint Nextel and Comcast plan to aggressively roll out mobile WiMAX services that mirror Clearwire's rollout. Sprint recently announced plans to introduce WiMAX offerings in 17 new markets before the end of the year. Comcast plans to begin reselling Clearwire's service in Chicago, Philadelphia and Washington state later this year, and is bundling the service with its other high-speed broadband services. Comcast COO Stephen Burke recently said the offering is attracting lapsed DSL subscribers.

Comcast began selling wireless broadband cards for laptops on Clearwire's mobile WiMAX network in Portland, Ore., in June. The company also has expanded the service, called High-Speed 2Go, to Atlanta, and is currently selling the service on promotion for $49.95 per month for a year. After the service resets to $69.95 at the end of the year, Comcast said it expects margins coming from the service to reach 40 percent.

Time Warner Cable, another Clearwire partner and wholesaler, will launch mobile WiMAX service beginning this fall in Dallas and Charlotte, N.C. as well as two other unnamed markets.

To me, Clearwire's ultimate success lies in how well Comcast and Time Warner Cable can penetrate a customer base not yet attracted to standalone 3G offerings. In Portland, Comcast is offering mobile broadband and high-speed home Internet service for $50, a bundle neither AT&T nor Verizon is offering at this point, analyst firm Strategy Analytics recently pointed out. Comcast and Time Warner will have to get creative though before AT&T and Verizon come to market with similar offerings, the firm warned.

In short, bundled offerings aren't going to cut it for long.

On a sad note, Tom Murphy, vice president of Sprint's corporate branding division, was killed Friday near Aspen, Colo., after a boulder fell off the side of a mountain and landed on the SUV he was driving. Tom and his family were on their way home from a family vacation when the accident happened. He is survived by his wife and three sons, one of which was injured in that accident. I had the pleasure of dealing with Tom during the early days of Sprint when he worked in Sprint's corporate communications division. He was an avid outdoorsman who usually had some sort of sports injury when I saw him at trade shows. He was one of the most positive people I've ever met. Our thoughts and prayers are with his family. --Lynnette

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