4G Carrier Clearwire Making Cuts - Twice

4G Carrier Clearwire Making Cuts

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Kirkland, Wash. - Mobile WiMAX network operator

Clearwire

is exceeding its subscriber targets but nonetheless launched an aggressive round of cost reductions to conserve cash in case it's unable to raise enough money to continue expanding its 4G network.

 The carrier said the cuts, including a 15 percent cut in staff, will deliver "potential cost savings of between $100 million to $200 million in 2010 and again in the first half of 2011."

  Revenues grew 114 percent in the third quarter to $147 million, but the company's operating loss grew 85 percent to $539.7 million, compared with the year-ago period, following a second-quarter operating loss of $520.8 million and first-quarter loss of $407.2 million.

  "While we continue to exceed our subscriber and operational goals, we have not yet secured future funding, and prudence dictates that we take appropriate cash conservation steps to reduce costs," Clearwire said in a statement. To raise additional capital, the company "is in discussions with a number of its major shareholders and other third parties about a number of options, including potential strategic transactions, additional debt or equity financings, and/or asset sales [including excess spectrum]." The carrier said it is "cautiously optimistic that we will resolve our short-term funding needs in the near future."

  Clearwire markets 4G service under its own Clear brand direct to consumers as well as through wholesale partners such as Sprint.

 The cost reductions, described as "significant cash conservation measures," include a substantial reduction in sales and marketing spending; a suspension of additional direct-to-consumer retail-channel launches of Clear-branded operations in select markets, including Denver and Miami; delays in the introduction of Clear-branded smartphones; a "substantial reduction" in the contractor workforce, a 15 percent reduction in the number of employees; and the discontinuation of development activities for sites not required for its current build plan.

  The company said thousands of sites beyond its current buildout plan are in various stages of planning and construction and that it will suspend zoning and permitting in some of those sites until additional funding becomes available.

 As of Nov. 1, the company's domestic 4G coverage reached approximately 82 million people in launched markets, including recently launched New York City. Including areas not yet commercially launched, Clearwire's 4G network reaches about 100 million people. By year's end, the company will expand coverage to 120 million people, including those in San Francisco and Los Angeles.

 As for subscribers, the company expects to end the year with more than 4 million subscribers, almost doubling the company's original 2010 expectation of just more than 2 million, said CEO Bill Morrow.

 For the quarter ending September, total subscribers hit 2.84 million, up 402 percent year over year, with total net subscriber additions of 1.23 million. Third-quarter net ads included 150,000 direct, or retail, additions and 1.1 million wholesale additions. The latter includes 3G/4G devices that consumers are using in areas where Clearwire hasn't yet launched 4G service, but the company expects to receive nominal revenue from them in the future. As of September 30, about 45 percent of the company's wholesale subscribers resided outside of Clearwire's launched markets.

  The third-quarter subscriber base consisted of 1.01 million direct, or retail, subscribers and 1.83 million wholesale subscribers, marking the first time that the company's wholesale subscriber base exceed its direct subscriber base.

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