Clearwire Selects Infrastructure Providers; Announces Earnings & Additional Markets

Clearwire has signed an agreement with Chinese network equipment company
Huawei to supply Mobile WiMAX radio access network (RAN) equipment for the CLEAR
nationwide network in the U.S.  Under the three-year deal, Huawei will
provide WiMAX base stations, element management system (EMS) components, and
related network hardware and software.  Clearwire also named several other
strategic suppliers for its WiMAX network: Motorola and Samsung for RAN
equipment; Cisco for the core Internet Protocol (IP) Next-Generation Network
infrastructure; DragonWave for the network’s microwave backhaul transport; and
Ciena for base station switching.  All of these except Ciena had been
previously announced.  DragonWave was the microwave backhaul vendor for
both Sprint’s Xohm network in Baltimore as well as the old Clearwire’s planned
WiMAX network.  Motorola also provides additional microwave backhaul
equipment.  Clearwire has said that by the end of 2010 it wants to cover 80
markets and 120 million people for its CLEAR network in the U.S.  However,
the ultimate scope and timing of Clearwire’s network build-out will largely be
driven by the Clearwire’s market- by-market success and the availability of
additional capital for network expansion. 

For Huawei, the Clearwire deals marks its first top-tier player in the
U.S., where it has struggled to gain a foothold (Leap Wireless is its only other
wireless customer).  A previous joint venture with 3COM did not result in
any material U.S.  carrier business.  "We view this as a major
milestone in our overall strategy in North America," Charlie Chen, a Huawei
marketing and product management executive, told the WSJ.  "Clearwire’s
vision for connecting the Internet to people, not just places, and their
dedication to building the first nationwide WiMAX network in the United States
is an exciting opportunity for Huawei," said Wan Biao, President of Huawei
Wireless Product Line.  "Today’s announcement is an important milestone and
represents a significant step toward establishing Huawei’s presence in North
America and further demonstrates our commitment to delivering high-quality
products and services to our customers."

Huawei’s equipment will allow Clearwire to deploy its network at lower cost. 
During a conference call for reporters, Clearwire’s CTO John Saw said improved
receiver performance means fewer cell sites, leading to cost-savings of 20 to 30
percent.  Clearwire plans to deploy about 20,000 base stations at a cost of
$150,000 each.  Saw stated that Huawei was selected for Clearwire’s network
because it is the first vendor to make a multicarrier, four-transport base
station that will provide extra capacity and streamlined deployment.  "The
cost savings will help," he said.

Overseas, Huawei has been very successful in selling all types of networking
equipment (especially optical and wireless) by undercutting the competition. 
Huawei is a private Chinese company, founded by Ren Zhengfei in 1988.  As a
result, they don’t have to report financial results to the public.  With
access to a huge workforce, which accepts far lower rates of pay than its
Western counterparts, Huawei initially competed on price, picking up business in
emerging markets from carriers with less money to spend.  But now, the
company serves 36 of the world’s top 50 operators, along with over one billion
users worldwide.  While other network equipment companies have struggled
and slashed costs in a frantic bid for survival, Ren Zhengfei has kept Huawei’s
R&D budget at a relatively high level.  Ten per cent of Huawei’s annual
revenue is diverted into R&D.  Huawei Senior Vice President of Marketing
and Product Management Charlie Chen said the company has more than 2,000
engineers working on WiMAX R&D, and has already shipped more than 1 million
WiMAX base stations.

In 2008, Huawei’s revenues were up 46 per cent year on year to $23.3bn (with 75
per cent of those sales coming from outside of China).  It’s said that half
of the firm’s workforce are engaged in research and development.  Huawei
states it is "committed to providing innovative and customized products,
services and solutions to create long-term value and growth potential for its
customers." We don’t doubt that at all. 

The newswires did not pick up the importance of Ciena’s selection as a
Clearwire infrastructure vendor.  The optical network transport and
switching company had not previously won any significant business from a WiMAX
network operator.  We think this is an important milestone for the company. 
Ciena recently announced that it was providing Carrier Ethernet based backhaul
for Clearwire’s mobile WiMAX service (CLEAR) in Las Vegas, in addition to
deployments in Baltimore, Atlanta and Portland.  But no details were
announced by Clearwire on what role Ciena would play in "Base Station
switching."

In summing up the CLEAR network architecture and capabilities, CTO Saw stated,
"Our new network is specifically designed to deliver an unmatched combination of
4G speeds, capacity, and mobility to meet the growing demand for wireless
broadband services.  As such, we have designed an all-IP network that is
efficient, low-cost and scalable using standards-based technology from
industry-leading providers.  Our existing agreements with Motorola,
Samsung, Cisco, and DragonWave, plus today’s addition of Huawei, provide us with
the capabilities and support necessary to deliver super fast mobile Internet in
more ways for both our customers and strategic wholesalers."

Clearwire’s Earnings Report and Subscriber Growth

In a press release and follow up conference call, Clearwire announced a second
quarter loss that was slightly less than a year ago.  Clearwire had a
quarterly loss of $73.4 million, or 38 cents a share, compared with a
year-earlier loss of $74.6 million, or 38 cents a share.  Revenue rose 9%
to $63.6 million.  Average revenue per user edged up to $39.47, helped by
increased sales of service bundles.  Churn, or customer cancellations
during the quarter, rose to 2.8% from 2.6%. 

While that disappointed stockholders who sold off the firm’s stock, the company
hinted that its rapidly-accelerating rollout of Mobile WiMAX service will begin
showing positive results later this year. 

Clearwire has seen growth slow in recent months.  The total subscriber
count rose 11%, to 511,000, but net additions were down a third from a year
earlier, to 12,000.  The company predicted in May that net additions would
shrink in the second quarter.  However, Clearwire stated that there was
strong subscriber sign-ups in Portland, OR and late in the quarter in Atlanta,
GA.  More importantly, CEO Bill Morrow stated that Clearwire expected more
new net subscribers in the fourth quarter of 2009 then in all other quarters
combined.

"We are already seeing average daily WiMAX subscriber uptake in July outpacing
what we achieved in June by over 75%," Morrow said in a statement.  "It is
important to keep in mind that at the same time we are posting strong subscriber
adds in our three CLEAR 4G markets we are also seeing the expected customer
attrition in Clearwire’s large base of 46 U.S.  pre-WiMAX markets." Morrow
added that several new market debuts for its WiMAX service in 2009 should help
Clearwire achieve the "critical mass of coverage and customers that will help
propel the company forward in the next year."

Editors Note:  In addition to mobile WiMAX, Clearwire offers a
"pre-WiMAX" fixed wireless broadband service in 46 U.S.  markets.  As
the company concentrates more on mobile WiMAX, customer defections and
subscriber growth are likely to be adversely affected.

Clearwire’s Mobile WiMAX Deployments and Network Build Out Plans

CLEAR WiMAX service is currently offered in four U.S.  cities: Baltimore,
Portland, Atlanta and Las Vegas.  CEO Morrow stated, "The next wave of
CLEAR launches in 2009 is on track to extend our 4G network to over 30 million
people in more than 25 markets by the end of 2009 bringing Clearwire’s total
network coverage in both legacy and 4G markets to over 40 million people."

Morrow continued.  "With the 2009 addition of new markets like Chicago,
Dallas/Ft.  Worth and Philadelphia, and the migration of pre-WiMAX markets
like Seattle, Charlotte and Honolulu, CLEAR’s super fast mobile Internet service
is poised to achieve a critical mass of coverage and customers that will help
propel the company forward into next year.  And as I hope you’ve read, we
have announced plans to add San Antonio and Austin, Texas, Milledgeville,
Georgia, Raleigh and Greensborough, North Carolina, and Salem, Oregon.  All
of these new markets are progressing towards a fourth quarter launch.  We
continue to target true broadband mobility, covering up to 120 million people in
80 markets by the end of 2010."

"Some of the markets slated for 2010 include New York, Boston, Washington, D.C.,
Houston, and the San Francisco Bay area, among many others."

Editors Note:  Clearwire groups it’s "4G" market expansion into two
categories — conversion markets, where it operate pre-WiMAX services, and the
new mobile WiMAX (CLEAR) markets.  Last week Clearwire announced that it
would complete its first 10 conversion markets on September 1, 2009.  These
include Boise, Idaho, [Bellingham], Washington, and eight Texas communities. 
In the fourth quarter, Clearwire plans to convert Charlotte, Seattle, Honolulu,
and Maui.  For more information, please see:  

Clearwire to Launch CLEAR Service in 10 Markets on September 1, 2009.

Key Operating Highlights:

- Atlanta and Las Vegas Markets Launch CLEAR? Adding nearly Five Million People
and 1,800 Square Miles to Coverage Footprint
- Nationwide Roaming in CLEAR Markets Now Available via Clear 4G+ Mobile 4G/3G
Service
- Now Targeting Over 40 Million Total Covered POPs for 2009;  CLEAR 4G
Network Set to Increase Five-Fold in 2H 2009 Reaching Over 30 Million People
Across More Than 25 Markets by Year End
- Clearwire’s Wholesale Systems Platform Initialized; Sprint, Comcast and Time
Warner Cable Announce 2009 4G Plans and Comcast Begins Launching Service
Offerings

Key Performance Highlights – Q2 2009 vs.  Pro Forma Q2 2008

- Portland and Late-Quarter Launch of Atlanta Generate Strong WiMAX Subscriber
Additions Offsetting Higher Seasonal Churn in 46 US Pre-WiMAX Markets and Drive
12,000 Net Adds During Q2 2009
- Revenues Increase 9 Percent Driven by 11 Percent Subscriber Growth and ARPU
Stable at $39.47
- Network Covered POPs Increase Nearly 40 Percent to 23.1 Million
- Design and Development Pipeline Includes More Than 20,000 Cell Sites to Fuel
First U.S.  4G Network Build Plans
- Ends Second Quarter with Cash and Short Term Investments of $2.5 Billion

For more information on Clearwire’s earnings report, please see: 

Clearwire Reports Second Quarter 2009 Results
 

Sprint Announces Additional Markets

On the heels of Clearwire’s announcements, SPRINT said it’s expanding its Mobile
WiMAX (CLEAR reseller)service to 17 new cities by the end of the year.  The
new additions for 2009 include Texas, Washington, Hawaii, Idaho, North Carolina
and Oregon joining the previously announced markets of Atlanta, Chicago,
Dallas-Fort Worth, Honolulu, Las Vegas, Portland, Philadelphia and Seattle. 
The Overland Park, Kan.-based company also said it plans to sell the service in
Boston, Houston, New York City, San Francisco and Washington, D.C., next year.