Clearwire's results show signs of growth, both good and bad

Clearwire Corp. released fourth quarter and full-year 2009 results this morning showing the financial strains of launching a new wireless service, but backed by positive signs that its WiMAX service is starting to attract customers.
The company posted a 34% year-over-year increase in operating revenues for the fourth quarter from $59.7 million in 2008 to $79.9 million in 2009. The results were slightly higher than analysts’ expectations. The increase was bolstered by strong customer growth from 475,000 customers at the end of 2008 to 688,000 at the end of 2009 and a slight uptick in average revenue per user from $39.70 for the fourth quarter of 2008 to $39.86 in 2009.
Clearwire noted that it added 87,000 net customers during the fourth quarter, including 90,000 customers to its mobile WiMAX service and a loss of 3,000 subscribers to its legacy pre-WiMAX offering, compared with 5,000 net customer additions during the fourth quarter of 2008. At the end of 2009 Clearwire said it had 642,000 direct customers on its network and 46,000 customers through its wholesale partners. Those partners include Sprint Nextel Corp. as well as Comcast Corp. and Time Warner Cable that have recently begun offering the mobile broadband service to their customers.
The strong revenue growth was offset by increased operating expenses that surged 63% year-over-year during the fourth quarter from $304.9 million in 2008 to $497.6 million in 2009. The carrier attributed some of this jump to increased tower rents as it expands its network, increased equipment sales and related subsidies, and a $41 million write off of customer premise equipment and network and base station equipment.
The increased costs took its toll on Clearwire’s bottom line as net losses climbed from $90.4 million pro forma for the fourth quarter of 2008, a loss of 47 cents per share, to a loss of $98.7 million for 2009, or a loss of 55 cents per share. For the full year, Clearwire’s losses remained relatively stable moving from a loss of $314.1 million pro forma in 2008, a loss of $1.73 per share, to a loss of $325.6 million in 2009, or a loss of $1.74 per share.
Clearwire’s stock was trading down slightly early Wednesday at around $7 per share.
Clearwire’s capital expenditures also surged during the fourth quarter from $83 million in 2008 to $767 million in 2009 reflecting the increased build out of its network. The carrier said it ended 2009 with access to $3.8 billion in funds, compared with $3.1 billion at the end of 2008. Clearwire managed to secure nearly $3 billion in new funding during the fourth quarter of last year, with a substantial portion coming from its wholesale partners.
Clearwire’s management said the carrier was still on track to cover up to 120 million potential customers by the end of 2010, including service launches in many of the nation’s top 100 markets including New York; Boston; Washington, D.C.; Houston; the San Francisco Bay Area; Denver; Minneapolis; and Kansas City.
With the increased availability of its service, Clearwire expects subscriber levels to triple by the end of the year, implying a customer base of around 1.3 million customers, with both customer acquisition costs and ARPU to remain flat. Clearwire’s management said it expects around half of that customer growth to come from its wholesale partners, with subscribers signed up through its wholesale program eventually representing a majority of the customers on its network. During last year’s 4G World event in Chicago, Clearwire’s CEO Bill Morrow told RCR Wireless News that the company was content offering its own Clear-branded service, but that it would not rule out shifting its priorities to being a wholesale network supply to its partners.