Even with revenues dropping 14 percent in the last quarter and losses mounting, Clearwire exceeded its goal for LTE Advanced-ready network build, according Erik Prusch, president and CEO.
“We began to ramp up our build activity in the fourth quarter 2012 and exceeded our target of 800 fully commissioned sites with more than 1,000 LTE sites awaiting connection to Sprint’s core network at year-end,” he said during the 4Q earnings conference call.
The carrier remains on track to meet its goal of 2,000 LTE sites on air by the end of June 2013, increasing to 5,000 LTE sites on air by the end of 2013. To that end, it has 2,700 notices to proceed in hand, according to Prusch.
Clearwire had capital expenditures of $102 million in the fourth quarter, compared with $34 million for the previous quarter and $23 million for the fourth quarter 2011.
Capex in 4Q consisted primarily of LTE deployment in addition of WiMAX maintenance, according to Hope Cochran, chief financial officer. The total cost of the LTE build out is expected to be $600 million.
“Our LTE build hit its stride in the fourth quarter and we expect LTE equipment purchases for the initial phase of the build to ramp even faster in the coming quarters, as we build 5,000 sites by the end of 2013,” she said.
Clearwire’s revenue shortfall stirred rumors in the press about whether the carrier can survive the year without accepting financing from Sprint, which would essentially end Dish Network’s merger attempt.
This week’s blockbuster spectrum news was DISH Network’s proposal to purchase all of the Clearwire common shares at $3.30. Slightly more than the $2.97 per share offered by Clearwire’s half-owner Sprint Nextel, last December.
Sprint wasn’t buying it. In response to the DISH Proposal, Sprint stated in a letter to Clearwire that the DISH proposal is “illusory, inferior to the Sprint transaction and not viable because it cannot be implemented in light of Clearwire’s current legal and contractual obligations.”
The Wall Street Journal wasn’t buying it either, quoting analysts that ascribed many different ulterior motives to DISH Chairman Charlie Ergen’s negotiating tactics. While some said Ergen is looking to get Sprint to partner with DISH, others said he is acting out of revenge against Sprint for its attempt to block the FCC’s approval of DISH’s spectrum.
Charlie Ergen is a known for being a poker player that isn’t afraid to try to win with a bad hand, according to Clayton Funk, managing director, Media Venture Partners.
“[Ergen] can either sell his spectrum to Sprint or he can allow Sprint to lease his spectrum through a wholesale agreement,” Funk said. “Either way, it would be good for the tower industry because it would allow for more network deployment, with more antennas and lines on towers that utilize that spectrum.”
At the very least, DISH’s $3.30 offer may help the class action lawsuit of Crest Financial, Clearwire’s second largest shareholder, which accuses Clearwire of accepting too low of an offer at $2.97 per share.
“What Ergen will certainly achieve is to give Crest and Mount Kellett far more ammunition in their fight against the Sprint takeover, potentially tying up the proposed Sprint buyout for months,” wrote Tim Farrar, principal, Telecom, Media and Finance Associates, in a blog post.
A brief summary of the proposed deal. DISH would acquire 24 percent of Clearwire’s spectrum for $2.2 billion, with the option of an additional 2 megahertz. Also, Clearwire would provide DISH with the construction, operation, maintenance and management of a wireless network covering AWS-4 spectrum and new deployments of 2.5 GHz spectrum.
SoftBank’s investment in Sprint is a good start, but regaining control of Clearwire is likely to be the game changer for the US market, according to Principle Analyst, AnalysysMason Chris Nicoll.
In a recent article Nicoll discussed the impact of Japanese telecommunications investment firm and operator SoftBank’s $20.1 billion investment in Sprint. He said, while the promised $8 billion in cash will aid with the rapid completion of the Network Vision network and the deployment of LTE service, it will not be enough to move Sprint out of its third place position.
“An infusion of capital will not guarantee Sprint’s success,” Nicoll wrote. “[Sprint] is a competitive number three, but it must complete its Network Vision consolidation project to address the spectrum refarming and technology issues of pulling its iDen, CDMA and the Clearwire WiMAX networks together and it needs to accelerate its LTE deployment.”
In addition to competing with the “Big Two,” Sprint faces renewed pressure from T-Mobile USA, which, along with the $3 billion received from AT&T from the failed merger, has received spectrum in a swap with Verizon Wireless and looks to close a merger soon with MetroPCS. “While it is easy for SoftBank/Sprint to set its sights on market leadership, losing track of T-Mobile is not advised,” Nicoll wrote.
Even with the proliferation of LTE technology, there is still a dearth of high-speed networks. According to AnalysysMason tests, U.S. LTE networks are reaching maximum speeds of 50 Mbps, but are more commonly operating at 8 Mbps to 16 Mbps. Filling that need may be the key to success for Sprint, Nicoll noted.
If Sprint took control of Clearwire it could distinguish itself from the carrier field as the only true 100 Mbps operator, according to Nicoll, using Clearwire’s 2.5 GHz spectrum, TD-LTE technology and SoftBank’s network expertise.
“SoftBank will need to take another big step to change the dynamics of the U.S. 4G market in its favour,” Nicoll wrote. “We suggest that Clearwire’s spectrum could provide the key that could really unlock growth opportunities for SoftBank in the United States.”
The increased speed will help Sprint compete in the market, where it is three years behind Verizon Wireless in deploying LTE. In total, the carrier needs to add 40 million subscribers, Nicoll wrote.