Clearwire's figures show that the network it isn't cool to love will be making placating faces at its bank manager for yet another quarter. It pulled in revenues of $313.9 million for the three month period, but with business costs (and depreciation) clocking in at $646.7 million, the company posted an operating loss of $332 million and a net loss of $41.3 million. If that wasn't bad enough, it's also hacked back a target to add TD-LTE to 5,000 sites before mid-2013 to just 2,000. A similar problem has occurred over at newly-minted majority owner Sprint, which has found itself a quarter behind its own LTE timetable thanks to parts shortages -- so let's hope the folks over at Softbank can help both companies improve their estimating skills.
Clearwire Reports Third Quarter 2012 Results
Raises Guidance for 2012 Adjusted EBITDA; Lowers 2012 Capex Guidance
$1.2 Billion Cash, Cash Equivalents and Investments at Quarter-End
Significant Advancements in Global TDD-LTE and 2.5GHz Ecosystem
BELLEVUE, Wash., Oct. 25, 2012 (GLOBE NEWSWIRE) -- Clearwire Corporation (Nasdaq:CLWR), a leading provider of 4G wireless broadband services in the U.S., today reported its financial and operating results for third quarter 2012.
"Recent developments in the U.S. wireless industry serve as a direct reminder of the key strategic role deep spectrum resources and a global LTE ecosystem will play in the long-term success of any 4G mobile broadband operator," said Erik Prusch, President and CEO of Clearwire. "Clearwire's unmatched spectrum assets and focus on serving major population centers will be the foundation on which we will build a critical 4G LTE network positioned to serve the needs of the industry and the rapidly growing base of 4G customers across the country."
"Globally, our ecosystem choices continue to gain traction with a growing list of TDD-LTE deployments and we believe the recent decision in China to allocate 190 MHz of 2.5GHz spectrum to our preferred spectrum band, 3GPP Band 41, to deploy TDD-LTE networks will generate even greater interest from chipset, device and infrastructure vendors. The rising tide of TDD-LTE networks globally in the 2.5GHz band will ultimately allow Clearwire to realize significant economies of scale and provide a valuable competitive advantage."
Third quarter 2012 revenue declined slightly year over year to $313.9 million primarily due to a year over year decline in wholesale revenue. Third quarter 2012 wholesale revenue of $116.5 million, was relatively flat as compared to second quarter 2012 wholesale revenue of $117.6 million, and down (15)% year over year reflecting the fixed wholesale WiMAX revenue terms of the November 2011 Sprint agreement which took effect in 2012. Retail and other revenue increased 1% year over year to $197.4 million in third quarter 2012. Retail ARPU for third quarter 2012 was $45.06, representing a decrease of $(1.99) year over year as compared to $47.05 in third quarter 2011 primarily due to lower equipment lease and activation revenue under the new no-contract offering.
Clearwire ended third quarter 2012 with approximately 10.5 million total subscribers, up 10% from 9.5 million subscribers in third quarter 2011. The subscriber base consists of 1.4 million retail subscribers and 9.1 million wholesale subscribers, reflecting 21,000 retail net subscriber adds and 489,000 wholesale net subscriber losses during third quarter 2012. Wholesale subscribers consist primarily of Sprint 3G/4G smartphone customers.
Retail cost per gross addition (CPGA) was $191 in third quarter 2012 compared to $288 in third quarter 2011. The year over year improvement is primarily due to lower retail selling expenses associated with our no-contract offering as well as a lower cost structure resulting from our cost cutting initiatives in 2011. Retail churn was 5.1% in third quarter 2012, up from 4.2% in third quarter 2011. The increase in churn is primarily due to an increase in subscribers on no-contract plans, which were fully launched in first quarter 2012.
Adjusted EBITDA in third quarter 2012 was a loss of $(38.3) million, representing an $8.2 million improvement when compared to third quarter 2011 Adjusted EBITDA loss of $(46.4) million.
The company ended third quarter 2012 with cash, cash equivalents and investments of approximately $1.2 billion invested primarily in U.S. Treasury securities, reflecting a sequential decrease of $26 million from second quarter 2012. As compared to the prior year period, cash, cash equivalents and investments increased by $336 million.
Third quarter 2012 capex of $34 million related primarily to ongoing maintenance of Clearwire's mobile WiMAX network and the deployment of our LTE network, and increased $10 million and $17 million, respectively, as compared to $24 million in second quarter 2012 and $17 million of capex in third quarter 2011.
At the end of third quarter 2012, Clearwire operated networks in the U.S. covering areas where approximately 135 million people reside, including approximately 133 million people in markets where we provide 4G services, relatively flat as compared to the prior year period.
TDD-LTE and 2.5GHz Ecosystem Developments
Clearwire, as a founding member of the Global TDD-LTE Initiative (GTI), has continued to work closely with wireless infrastructure and carrier partners around the world to promote and develop the TDD-LTE ecosystem with an emphasis on expanding use of the 2.5GHz band we have established with standards bodies (Band 41) around the globe. The TDD-LTE ecosystem continues to grow with commercial or planned deployments in major population centers, and ABI Research recently estimated that continued rollouts of TDD-LTE networks would reach as many as 4.4 billion people worldwide by 2015. Significant progress was recently made on this front with the Ministry of Industry and Information Technology's (China's telecom regulator), announced plans to release the entire 190MHz of their 2.5GHz spectrum for TDD-LTE deployments in China and their adoption of the same Band 41 format advocated by Clearwire and other GTI members around the globe including Softbank Mobile (Softbank). Additionally, Softbank, who launched their TDD-LTE network in Japan in February 2012, broke new ground with their recent introduction of six TDD-LTE smartphones that also support the 2.5GHz band. We believe these developments further position Clearwire and our LTE wholesale partners to leverage significant economies of scale and innovation commensurate with a large global ecosystem of chipsets, devices and infrastructure equipment.
Clearwire continues to expect total revenue of $1.20 to $1.30 billion for full year 2012. The company expects 2012 Adjusted EBITDA loss of approximately $(150) to $(200) million, representing a $25 million improvement (at the midpoints) to previous guidance of $(175) to $(225) million.
Clearwire plans to have 2,000 LTE sites on air by the end of June 2013 and expects to start receiving Sprint prepayment installments in June 2013. Full year 2012 capital expenditures (capex) are now expected to total $125 to $175 million as compared to most recently provided guidance of $350 to $400 million. The decline in capex guidance is primarily due to the company's decision to defer a portion of its LTE build in order to better align capex with the expected receipt of LTE revenues.
Results of Operations
Cost of goods and services and network costs (COGS) in third quarter 2012 decreased 25% to $211.5 million compared to $282.5 million for third quarter 2011. These amounts include non-cash charges for network equipment reserves and other write-downs of $5.9 million and $38.7 million in third quarters 2012 and 2011, respectively, and other non-cash network-related charges of $19.7 million and $65.2 million in third quarters 2012 and 2011, respectively. The year over year decrease in non-cash charges for network equipment reserves is primarily due to a decline in write-downs of network equipment no longer required for deployment or sparing as we solidified our LTE network plans. The year over year decrease in other non-cash network related charges is primarily due to a higher provision for unused tower-related leases and other network agreements in third quarter 2011. Excluding non-cash expenses, COGS increased 4% year over year primarily due to an increase in customer premise equipment sales since the launch of our no contract retail model, which requires customers to purchase rather than lease devices, at the beginning of 2012.
Selling, general and administrative (SG&A) expense in third quarter 2012 decreased 21% to $139.4 million compared to $176.5 million in third quarter 2011. The decrease is primarily attributable to the continuing effects of actions taken in conjunction with Clearwire's cost cutting initiatives in 2011 including lower employee-related expenses resulting from headcount reductions and outsourcing of the customer care function, reduced marketing spend, as well as decreased selling commission expense associated with our no-contract product offering which was launched at the beginning of 2012.
Third quarter 2012 reported net loss from continuing operations attributable to Clearwire was $(41.3) million, or $(0.07) per basic share as compared to $(83.5) million, or $(0.34) per basic share, respectively in the prior year period. Including the effects of discontinued operations, third quarter 2012 reported net loss attributable to Clearwire was $(213.8) million, or $(0.38) per basic share, which increased as compared to $(84.8) million or $(0.35), respectively in the prior year period primarily due to a decrease in the loss allocated to non-controlling interests which resulted from the conversion of Class B common shares to Class A common shares by Time Warner Cable and Comcast during the period.