Clearwire aims to reach 120M people in 2010

Clearwire plans to launch its WiMAX wireless broadband service in 80 markets and reach as many as 120 million people by the end of 2010, the company said Thursday, as it disclosed its financial results for the fourth quarter of 2008.

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The company named nine cities where it plans to begin offering the service this year. During the summer, it expects to roll out service in Las Vegas and Atlanta, reaching more than 4.5 million people between the two markets. Summer in the U.S. generally means June through August.Also in the plan for this year are Chicago, Philadelphia, Dallas-Fort Worth and three markets where Clearwire already has pre-WiMAX service: Seattle, Honolulu and Charlotte, North Carolina. All pre-WiMAX markets will be converted by the end of 2010. It will also relaunch a Baltimore network that was opened by Sprint Nextel last year.

Next year, Clearwire will start commercial service in other large metropolitan areas, including New York, Boston, Houston and the San Francisco Bay area.

The company, formed by Sprint and the old Clearwire pre-WiMAX broadband carrier in a deal that closed late last year, also expects to deliver a dual-mode 3G/WiMAX modem around the middle of this year. The modem would work on Sprint's 3G network and expand the reach of Clearwire's coverage nationwide. Clearwire so far has only announced commercial WiMAX service in two markets: Baltimore and Portland, Oregon.

In the fourth quarter, Clearwire brought in about $20.5 million in revenue and lost $118 million, or $0.28 per share. At year end, it had about 475,000 subscribers. Those results mostly reflected Clearwire's pre-WiMAX business, because at that point Baltimore was the only commercial market using the more advanced mobile WiMAX technology. The Portland launch took place Jan. 6.

As the company completed its merger deal, it shifted its original deployment plans back, CEO Benjamin Wolff acknowledged on a conference call following the results. The delay was well worth it to get priorities worked out, he said.

"Our expansion efforts are in full swing," Wolff said.

Going forward, Clearwire will set the pace of its buildout depending on the cost and availability of capital, said Chief Financial Officer David Sach. But the company is managing its cash prudently and can last into 2011 with what it has on hand, executives said.

Last month's announcement by Verizon Wireless that it would commercially launch a competing mobile broadband technology, LTE (Long-Term Evolution), in 2010 cut down a head start that many WiMAX proponents have emphasized as a competitive advantage. But Wolff downplayed the time element.

"Our competitive advantage is not measured in months, but rather, in assets," he said. Critically, Clearwire has a much broader radio frequency band than most other U.S. mobile operators, 120MHz in most major metropolitan areas. That means the capacity to deliver more bits to more subscribers, important at a time when data services is the fastest-growing part of the mobile business.

The company also said it has a cost advantage from using wireless microwave for backhaul links from cell towers to the Internet. While traditional carriers spend billions of dollars a year on wired backhaul, the microwave links have almost no ongoing cost, executives said. This increases Clearwire's margin and will help it turn profitable sooner, they said. The company should be able to break even with fewer than 10 percent of the people in its coverage area subscribing, Sach said.

In Portland, the performance of the network has exceeded Clearwire's expectations, and the network has attracted subscribers more than twice as quickly as did Clearwire's earlier, pre-WiMAX networks, according to Wolff. In Baltimore, the network is being built out to cover more of the city, in line with a new rollout strategy. It will be relaunched under the Clear brand, to match the rest of the national marketing, later this year, Clearwire said.

The company's wholesale resale partners should begin to offer the service themselves in the second half of this year, starting midyear in Portland, Clearwire said. Comcast and several other cable operators, in addition to Sprint, invested billions in Clearwire last year in return for being able to offer a fast mobile wireless service. Google also invested and plans to deliver some online applications and services over the network.

Clearwire's stock on the Nasdaq (CLWR) was unchanged in after-hours trading Thursday after falling $0.28 to $3.00 in regular trading.

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