Clearwire reported its Q3 2010 financial earnings last week, and they surpassed our expectations.
Clearwire reported its Q3 2010 financial earnings last week, and they surpassed our expectations. In 2009 the operator closed the year with 688,000 subscribers, of which 65% were 4G and the remaining were served by Clearwire’s pre-4G markets. The company anticipated to triple the total number of subscribers to 2 million by 2010, however as of September it had already surpassed this target, announcing 2.84 million subscribers covered and with a new guidance of 4 million subscribers by the end of 2010. Today, 80% of Clearwire subscribers are using WiMAX devices, and the remainder are still hooked on pre-WiMAX (expedience). We anticipate that by the end of next year all Clearwire’s subscribers will be pure on WiMAX devices. By year 2015, we project that Clearwire could reach 15 million of subscribers if its funding challenges are fully met.
One of the drivers for Clearwire’s success is its wholesale business model. Its wholesale partners Comcast, Sprint, Time Warner Cable, and Bright House Networks, among others, contributed to more than 65% or 1.83 million of its 4G subscriber base as of Q3 2010. In fact 45% of Clearwire’s wholesale subscribers are “off network,” meaning outside its 4G footprint, but served by its partners. From these subscribers Clearwire receives nominal monthly recurring revenue from its partners, or wholesale ARPU, of US$4.46, as compared to its retail ARPU of $42.27. The company, however, is in negotiations with its partners over those rates and hopes to recover more revenue from off-net subscribers. Clearwire has announced that it will increase the retail pricing plans by US$5.00, so it expects that retail ARPU will be around US$44.00 in the fourth quarter of this year. It is possible that this measure responds to Clearwire’s pressure to obtain additional funding to continue expanding its 4G network.
Sprint, which owns approximately a 53.9% interest in Clearwire, is the longest-standing and most aggressive MVNO partner. The vast majority of Clearwire’s wholesale customers outside its WiMAX footprint must be served by Sprint’s 3G/4G Smartphones: the HTC EVO™ 4G and the Samsung Epic 4G – more than 800,000 subscribers are served with these handsets. In a briefing at 4GWorld 2010 with Dow Draper, Vice President Product Development & Innovation of Clearwire, commented that Smartphones and WiFi hot-spots have been extremely successful. He said that the dominant installed base still consisted of residential modems and USB dongles, and that PCMCIA cards had been discontinued, but that ecosystem is changing rapidly. USB dongles, he commented, have a 5%-6% penetration rate in Clearwire’s network, and a life cycle of two years; handsets have a 10-month life cycle, and customers normally refresh their devices every 12 months. We believe that with this tendency, the killer devices on Clearwire’s networks will be Smartphones, Laptops and tablets, which represent the biggest growth areas. Clearwire’s 4G service is unique because it offers a broad choice of innovative applications and devices – in total it has more than 57 WiMAX devices used in the market place and expects the number will increase overtime.
Will Clearwire deploy LTE in the future? So far, it is conducting LTE tests using different scenarios. The company anticipates these tests to conclude in the first quarter of 2011. However once LTE networks become operational, Clearwire’s WiMAX network could be hurt by the intense competition, and Sprint and Clearwire will need to rapidly decide whether they will remained focused on WiMAX or shift strategies to enter the LTE arena. Thanks to Clearwire’s spectrum position the company has claimed it is able to evolve to the latest radio technology if and when there is a reason to do so. Maravedis believes that eventually the Clearwire/Sprint partnership will go the LTE route; that is if the funding issue is resolved soon.
For additional information on this operator you can view “Clearwire 4G Profile – November 2010” which is now available for sale from Maravedis. For more information visit http://www.maravedis-bwa.com/en/reports/1.
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Author: Cintia Garza, Team Leader 4GCounts & Market Analyst CALA