Thursday, October 6, 2011

Clearwire Stung by Sprint's Network Vision

Shares in Clearwire Corporation (NasdaqGS: CLWR ) fell 32% on Friday to close at $1.39, following Sprint's Network Vision webcast. Sprint revealed that it is pursuing FDD LTE using its own spectrum in the 1900 MHz band (and later its own 800 MHz spectrum) and shifting away from WiMAX and Clearwire's TDD LTE transition strategy. Sprint has network agreements in place with Clearwire through 2012 but not after that. Sprint executives also declined to state whether they would invest more in Clearwire to ensure that it remains a viable on-going network. Negotiations between the companies are expected to continue.

For its part, Clearwire issued the following statement:

“As the largest wholesaler of 4G capacity, with unmatched spectrum, Clearwire is uniquely positioned to offer capacity to Sprint, and other carriers, particularly in urban areas where demand is high and their 4G spectrum will be inadequate. Sprint remains dependent on Clearwire for 4G and nothing about today's announcement changes that. Even with their re-allocation of existing spectrum, it's obvious that their spectrum resources are insufficient to meet the long term demands of mobile data, but this is not unique to Sprint. Data capacity will clearly stress the capabilities of the low capacity 4G deployments of other carriers due to their spectrum constraints.

“We are also working globally with other members of the Global TDD-LTE Initiative (GTI), including China Mobile, to develop a low-cost, highly scalable device ecosystem that will work across various LTE networks and frequencies. As demand for mobile data increases, Clearwire remains the only viable 4G wholesaler with an operating 4G network, substantial spectrum resources, and a global technology road map to serve this growing market."

  • Clearwire ended Q2 2011 with approximately 7.65 million total subscribers, up 365% from 1.64 million subscribers in the second quarter 2010. The subscriber base consists of 1.29 million retail subscribers and 6.36 million wholesale subscribers. During the second quarter 2011, Clearwire added 1.54 million total net new subscribers, comprised of 39,000 retail and 1.50 million wholesale net new subscribers. Clearwire's wholesale subscribers consist primarily of users of 3G/4G smartphone devices. The company reported Q2 revenue of $322.6 million and a net loss from continuing operations attributable to Clearwire was $160.5 million, or $0.65 per basic share.

  • Clearwire is currently seeking funding to continue its expansion and network conversion.

  • In August 2011, Clearwire confirmed its intention to deploy "LTE Advanced-ready" technology in its 4G network while restating its commitment to its existing 4G WiMAX network, which covers approximately 132 million people while serving 7.65 million retail and wholesale customers. The company expects to end 2011 with approximately 10 million 4G customers.

    Clearwire said the initial LTE deployment will target densely populated, urban areas of its existing 4G markets where current 4G usage demands are high.

    Clearwire said its LTE network will be "LTE Advanced-ready," meaning that it will use spectrum configurations capable of 100+ Mbps downlink speeds. The LTE implementation plan, which is subject to additional funding, contemplates deploying Time Division Duplex (TDD) LTE technology. The plan calls for upgrading the all-IP network architecture and base station radios, as well as some core network elements. The LTE overlay will include the use of multicarrier, or multichannel, wideband radios that will be carrier aggregation capable. Carrier aggregation is a key feature of LTE Advanced that will enable Clearwire to further leverage its spectrum depth to create larger "fat pipes" for deploying mobile broadband service.

    Clearwire also stated its decision not to use Sprint's "Network Vision" infrastructure for the LTE overlay because it substantially more expensive that overlaying its own network, but Clearwire said the companies are discussing the possibility of using Sprint's "Network Vision" in new markets. The WiMAX infrastructure will be preserved for a significant period. The believes its key competitive advantage is having "the deepest spectrum" on the only globally coordinated 4G band (2.5 GHz).
    Clearwire holds an average of 160 MHz of spectrum nationwide, more than AT&T and T-Mobile together, in one contiguous band, enabling wider channels for high-bandwidth applications. The company noted that even if LightSquared gets permission to go ahead with a 2x10 MHz LTE wholesale network, the Clearwire network eventually could offer 20x more capacity at each cell site using superior spectrum.

    With the overlay initially focused on the most heavily-used urban areas, Clearwire estimate the CAPEX costs for an LTE overlay are $600 million. A typical market overlay can be completed in 12 months of initiating the build.

  • In August 2011, Clearwire named Erik Prusch as its new President and CEO. John Stanton, the company's Chairman and interim CEO, will become Executive Chairman of the Board of Directors.

  • In August 2010, Clearwire began testing coexistence scenarios for WiMAX and LTE in Phoenix using both Frequency Division Duplex (FDD) of 40 MHz of spectrum paired in 2 x 20 MHz contiguous channels ("LTE 2X"), and Time Division Duplex (TDD) configurations using 20 MHz of spectrum. Initial tests have recently confirmed that the company's LTE 2X trial network achieved peak download speeds on commercially available equipment and devices in excess of 90 Mbps and upload speeds of more than 30 Mbps. Clearwire later updated the test reports noting consistent 120 Mbps downlinks using TDD-LTE.


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