With the announcement, made alongside its second-quarter financial report on Wednesday, the carrier is finally lining up with the majority of the world’s mobile operators that have made LTE (Long-Term Evolution) a de facto standard for 4G infrastructure. But because of its large holding of radio spectrum, Clearwire [Nasdaq: CLWR] said it will be able to keep its WiMax network and keep offering services on it indefinitely.
The company plans to deploy LTE first in densely populated areas of its existing WiMax footprint where demand for mobile data is highest. Based on its own tests, Clearwire believes it can deliver between 50 Megbits per second and 90 Mbps to users, on average. The gear it plans to roll out would also support the faster LTE Advanced in the future. But even if it can raise the necessary funding, Clearwire doesn’t expect to be able to start its rollout for about six months and thinks it would take about a year to carry out.
Clearwire has long been expected to use LTE, especially following extensive tests it has conducted on the technology. Its existing infrastructure is compatible with the new technology to the point that in many markets Clearwire said it will be able to deploy LTE just by adding line cards to its base stations. But before it can move on the plan, the loss-making and relatively cash-strapped carrier will need to raise $600 million for capital expenditures, by its own calculation.
Though Clearwire was first to market with a 4G network in 2008 and now has more than 7 million subscribers, it has had to cut back on marketing and other functions in the face of an expensive network buildout. The WiMax infrastructure reaches about 132 million U.S. residents now, but its expansion has been relatively small this year. The company faces competition from Verizon Wireless’ LTE network and a looming LTE buildout by AT&T.
Its majority owner and biggest wholesale customer, Sprint Nextel, announced a deal of its own last week with startup LightSquared under which Sprint will build an LTE network that it can share with the cellular upstart. However, there’s nothing in the current wholesale deal between Sprint and Clearwire to keep Sprint from reselling capacity on the planned LTE network, Clearwire officials said.
Spectrum and existing infrastructure are the keys to Clearwire’s plans. It holds more than 100MHz of spectrum in many metropolitan areas, typically exceeding any other mobile operator’s holdings. Clearwire said it would start out using 20MHz for the LTE networks, twice what Verizon Wireless is using in most areas, and would add to that as needed. It could make extensive use of existing base stations, wired backhaul and leases on cell towers, though in some cases backhaul would have to be expanded and radios and antennas added on top of the new line cards, executives said.
As expected, the company plans to use TDD (time-division duplex) LTE, which uses a single channel for upstream and downstream traffic. Verizon Wireless and other early adopters of LTE use FDD (frequency-division duplex), which uses two separate channels. But Clearwire expects that within a year, almost all LTE handsets will be equipped for use of both TDD and FDD networks. Some of the world’s largest carriers are committed to TDD-LTE and to the same frequency band, around 2.5GHz, where Clearwire has its holdings, said John Stanton, Clearwire’s acting CEO.
Though the company posted another operating loss for the second quarter, it expects to have positive cash flow by early next year, ahead of its previous forecasts, executives said on a conference call. Clearwire has enough capital on hand today to continue operating for at least 12 months, they said. The company continues to look for outside sources of funding in addition to the capital it needs to raise for the LTE rollout.
In the second quarter, pro forma revenue was US$293.7 million, up 151 percent from last year’s second quarter. Clearwire posted a net gain of about 1.54 million subscribers, representing a gain of 39,000 customers for its own Clear service and 1.5 million users for the services of its partners, such as Sprint and cable operator Comcast Corp.