Is the Future of WiMAX Clear?

[David Farber <dave () farber net>]

Begin forwarded message:

From: dewayne () warpspeed com (Dewayne Hendricks)
Date: December 16, 2008 5:24:56 PM EST
To: Dewayne-Net Technology List <xyzzy () warpspeed com>
Subject: [Dewayne-Net] Is the Future of WiMAX Clear?

Is the Future Clear?
By Andy Seybold
Created Dec 8 2008 - 10:43am
<http://www.fiercewireless.com/story/future-clear/2008-12-08>

What do you get when you merge two WiMAX companies (Sprint and  
Clearwire) and raise yet another $3.2 billion from the likes of Intel,  
Comcast, Time Warner and Google? You get the new Clearwire, the so- 
called 4th-generation wireless broadband company with aspirations of  
becoming a contender in the mobile broadband marketplace in the United  
States.

Today, there is one city (Baltimore, Md.) that uses real mobile WiMAX,  
and it has been live for a month or so providing fixed WiMAX service  
to inside-wall customers and mobile WiMAX to most of the Baltimore  
area. There are also 57 much smaller markets served by the original  
Clearwire with pre-WiMAX covering 60 million to 80 million potential  
subscribers. The plan calls for the new Clearwire to turn on systems  
that will cover 120 million to 140 million people by the end of 2009  
and upgrade the 57 pre-WiMAX systems to WiMAX mobile.

The new NASDAQ trading symbol will be CLWR. The original Clearwire  
(CLWRD) was trading in the $5 per share range when this article was  
written, and Sprint was in the $2  to $3 per share range. But  
according to the new company, the valuation of the stock will be  
between $17 and $23 per share. I am not sure what this valuation is  
based on, it certainly cannot be the cash flow of the combined  
company, as Clearwire customers are very scarce right now. Each month,  
Clearwire continues to bleed, and even with this investment it is  
uncertain whether it can make money in the short or long term.

Clearwire says it will be building a nationwide network, yet in my  
interview with Sprint Xohm executives a few months ago, I was told  
they did not plan to build out a nationwide footprint but rather build  
out cities and their surrounding suburban areas only. Perhaps this is  
a change for the new Clearwire, or perhaps it is its way of saying the  
same thing as Sprint's Xohm people did but with its own twist.

In my estimation, $3.2 billion in new funding is not enough to take  
the new company to a cash-positive position. Clearwire will have to  
spend a lot of money building out systems in the major metro areas  
where it faces strong competition from wired, cable, some fiber, and  
three or four wireless 3G network operators plus Wi-Fi and some other  
services. Its voice component will be VoIP, which will only provide  
ancillary revenue. In the meantime, its wireless competitors' voice  
services provide the bulk of the revenue that funds their roll-out of  
3G services and helps them gear up for LTE, their choice for 4G  
services.

[snip]
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