Clearwire and Its Fuzzy WiMAX Outlook

January 22, 2010

With a covered population of roughly 30m at year-end 2009, Clearwire plans to increase its coverage to 120m by year-end, spending US$2bn to $2.5bn, roughly equal to its aggregate capex from 2005 to 2009 (see Exhibit). In addition to its $1.5bn in debt — which we expect to increase this year — and its lack of overall profitability, Clearwire will face substantial competition from Verizon’s LTE rollout. Verizon’s LTE network of nearly 100m covered will nearly match Clearwire’s WiMAX coverage this year. Furthermore, unlike Clearwire, Verizon has already announced continued coverage expansion with a near-nationwide reach by 2013.

Clearly, Clearwire has plenty to worry about, and so does the rest of the WiMAX community. The operator has publicly stated that it is tied to OFDMA rather than WiMAX. In Pyramid Research’s new report WiMAX and LTE: The Case for 4G Coexistence, I interviewed people at several operators, many of which are increasingly disloyal to individual network technologies. Rather, operators are focused on business models that revolve heavily around timing and the availability of the technologies that best support the business cases. Clearwire, however, is under agreement with Intel to use WiMAX through 2011. By this point, 802.16m, the next iteration of WiMAX, will be available, but will Clearwire have achieved the kind of uptake needed to reach profitability? Subscriber growth thus far has been lackluster and now appears to be heavily dependent on its increasing coverage and, perhaps more importantly, on the sway of three of its equity partners — Comcast, Time Warner Cable and Sprint.

Exhibit: Clearwire’s capex

Source: Clearwire, Pyramid Research estimates

— Daniel Locke, Senior Analyst

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