- 4G Network Now Reaches 119 Million People, Up 250% From Beginning of 2010
- Total Ending Subscribers of 4.4 Million, Up 540% From 688,000 Year Over Year
- Full Year Revenue $557 Million, 4Q Revenue $181 Million, Up 126% Year Over Year
- Consolidated 4Q Churn 2.1%, Improved From 3.6% Year Over Year
- 2011 Outlook to Double Subscriber Base
- Company Reiterates Support for Retail Distribution Model
KIRKLAND, Wash., Feb. 17, 2011 (GLOBE NEWSWIRE) -- Clearwire (Nasdaq:CLWR), a leading provider of 4G wireless broadband services in the U.S., today reported its financial and operating results for the fourth quarter and full year 2010.
"In 2010, we achieved our aggressive network expansion goals, grew our subscriber base at an incredible rate and solidified our position as a leader in the 4G industry in both network reach and customer growth," said Bill Morrow, Clearwire's CEO. "The Clearwire 4G mobile broadband network now reaches 119 million people in the U.S. and covers 71 of the top U.S. markets. Our network expansion represents one of the fastest in history, and unlike some wireless operators, our 4G network is highly scalable and backed by a wealth of spectrum. With recent projections estimating global mobile data traffic will nearly double annually through 2015, we believe more than ever that a deep spectrum position will be a requirement for long-term success in the high tonnage, video-enabled 4G world."
"Clearwire is also one of the fastest growing companies in the wireless industry. With fourth quarter subscriber additions in excess of 1.5 million, we now serve over 4.4 million customers and expect continued strong subscriber growth to more than double our total subscriber base in 2011. Despite this strong growth, our current plans and funding dictate that we remain prudent with our spending. This year, we plan to focus on improving the operating performance of our business by aggressively growing our wholesale business and reducing expenses. We remain very committed to our retail distribution model as well, and plan to prudently pace our retail growth in an effort to maximize our financial resources. We currently believe that the actions we are taking will allow our existing business to achieve positive EBITDA during 2012 and potentially become cash flow positive thereafter without the need for additional funding. Significant network expansion in the near term, however, remains contingent upon additional funding."
Clearwire ended the fourth quarter 2010 with approximately 4.4 million total subscribers, consisting of 1.1 million retail subscribers and 3.3 million wholesale subscribers. During the fourth quarter 2010, Clearwire added 1.5 million total net new subscribers, including 126,000 retail additions and 1.42 million wholesale additions. Approximately 27% of our wholesale subscribers are users of multi-mode 3G/4G devices residing in areas where the Company has not yet launched 4G service, but from whom it currently expects to receive nominal revenue.
Revenue for the fourth quarter was $180.7 million, a 126% increase over fourth quarter 2009 revenue of $79.9 million. Consolidated average revenue per user (ARPU) was $16.07, composed of a record retail ARPU of $45.10 and wholesale ARPU of $3.52 in the fourth quarter. Reported wholesale ARPU was determined based only on the $26.2 million of wholesale revenue the Company recognized in the fourth quarter due to the Company's previously disclosed pricing disputes with Sprint. Over the past few weeks, Clearwire and Sprint have held a number of productive discussions about the outstanding wholesale pricing issues. While nothing has yet been finalized, the Company believes that an agreement with Sprint resolving those issues is imminent. Consolidated cost per gross subscriber addition (CPGA) was $60 in the fourth quarter, comprised of $422 CPGA from the retail business and no CPGA in the wholesale business. Consolidated monthly subscriber churn was 2.1% in the fourth quarter, consisting of 3.8% in the retail business and 1.4% in the wholesale business. Under the proposed terms, the Company expects to receive substantial additional wholesale revenue.
The fourth quarter 2010 net loss attributable to Clearwire was ($128.0) million, or ($0.53) per basic share. The fourth quarter 2010 adjusted earnings before interest, taxes, depreciation and amortization and non-cash expenses related to operating leases and stock-based compensation expense (adjusted EBITDA) loss was ($497.4) million. The fourth quarter 2009 net loss attributable to Clearwire was ($98.7) million, or ($0.55) per basic share. The fourth quarter 2009 adjusted EBITDA loss was ($295.7) million. The full year 2010 net loss attributable to Clearwire was ($487.4) million, or ($2.19) per basic share.
At the end of 2010, Clearwire operated networks covering areas where approximately 117 million people reside globally, including approximately 112 million people in 4G markets in the U.S. We ended 2010 with nearly 14,500 4G cell sites on air utilizing in excess of 50,000 10 MHz carriers. As of mid-February 2011, Clearwire's 4G networks in the U.S. reached 119 million people.
Clearwire continues to seek additional funding to continue its network development by looking at a number of funding and other strategic alternatives, including potential strategic transactions, additional debt or equity financings and/or asset sales. In the second half of 2010, Clearwire initiated a process to seek bids for the potential sale of certain excess spectrum. During the process, the Company received offers to purchase varying amounts of spectrum from multiple parties, some of whom also expressed interest in exploring other strategic transactions with the Company. Currently, Clearwire is evaluating the offers received for its spectrum and is holding discussions with the interested parties. As a result, Clearwire has not yet made a determination as to whether to proceed with any sale and the Company now expects to delay a conclusion until second quarter 2011.
2011 Outlook
Clearwire expects to end 2011 with more than 8.8 million subscribers, with most of those subscribers coming from its wholesale business. Consolidated CPGA is estimated to fall to below $50 in 2011. The Company also expects to receive significantly higher wholesale ARPU in 2011. Without additional funding, the Company currently expects to cover approximately 130 million people with its 4G networks by the end of 2011, with new coverage focused primarily on rural areas where a build-out is required to protect its spectrum. Capital expenditures in 2011 are estimated to be less than $400 million.
Under its current plans, the Company now expects to reach positive EBITDA during 2012. However, this is based on a number of assumptions, including final resolution of the wholesale pricing disputes with Sprint and achieving the expected expense reductions.
Results of Operations
Cost of goods and services and network costs for the fourth quarter 2010 increased 63% to $275.6 million compared to $169.5 million for the fourth quarter 2009, primarily due to an increase in tower lease and backhaul expenses resulting from the launches of new 4G markets. During the three months ended December 31, 2010, the Company incurred approximately $55.2 million of expense related to excess and obsolete CPE, and write-offs of network base station equipment.
Selling, General and Administrative (SG&A) expense for the fourth quarter 2010 increased 19% to $233.2 million compared to $196.3 million for the fourth quarter 2009. The increase is primarily due to higher sales and marketing and customer care expenses in support of the launch of new markets, as well as additional resources, headcount and shared services that Clearwire utilized as it launched its 4G markets during the fourth quarter of 2010.
Loss from abandonment and impairment of network and other assets for the fourth quarter consists of approximately $168.8 million in write-offs related to abandonment of projects that no longer fit within management's strategic network plans. The abandoned projects were originally undertaken in connection with our network build-out that were not incorporated into our networks at launch and no longer fit within our future build plans.
Deceleration of network build activities led to a decrease in Capital Expenditures (CapEx) to $590 million in the fourth quarter 2010 from CapEx of $763 million for the third quarter 2010. CapEx was $2.7 billion for 2010. Cash utilization was approximately $2.1 billion for 2010 including net proceeds from financing activities of approximately $1.7 billion, primarily generated from the proceeds from the Senior Secured Notes, the Second-Priority Secured Notes and the Exchangeable Notes offerings completed in December 2010, as well as the Rights Offering completed in June 2010, and the final closing of the 2009 equity financing in the first quarter of 2010. The Company ended the fourth quarter 2010 with cash and investments of approximately $1.8 billion invested primarily in U.S. Treasury securities.
Clearwire Corporation
Summary of Financial Data
(In thousands)
(Unaudited)
Three months ended
----------------------------------------------
September
December 31, 30, June 30,
2010 2009 2010 2010
---------- ---------- ---------- ----------
REVENUES $ 180,669 $ 79,915 $ 146,964 $ 122,521
OPERATING EXPENSES:
Cost of goods and
services and network
costs
(exclusive of items
shown separately
below) 275,636 169,524 225,339 273,129
Selling, general and
administrative expense 233,174 196,308 244,070 216,121
Depreciation and
amortization 177,880 60,513 124,348 85,128
Spectrum lease expense 72,389 66,224 72,761 68,152
Loss from abandonment
and impairment of
network and other
assets 168,808 5,010 20,173 760
---------- ---------- ---------- ----------
Total operating
expenses 927,887 497,579 686,691 643,290
---------- ---------- ---------- ----------
OPERATING LOSS (747,218) (417,664) (539,727) (520,769)
LESS NON CASH ITEMS
Non Cash Expenses 71,946 61,408 84,716 72,396
Depreciation and
amortization 177,880 60,513 124,348 85,128
---------- ---------- ---------- ----------
Total non cash 249,826 121,921 209,064 157,524
---------- ---------- ---------- ----------
ADJUSTED EBITDA (497,392) (295,743) (330,663) (363,245)
Adjusted EBITDA Margin -275% -370% -225% -296%
KEY OPERATING METRICS (k
for '000's, MM for
'000,000's)
Total Net Subscriber
Additions 1,542k 122k 1,227k 722k
Wholesale 1,417k 35k 1,077k 595k
Retail 126k 87k 150k 127k
Total Subscribers 4,384k 688k 2,842k 1,692k
Wholesale(1) 3,246k 46k 1,829k 752k
Retail(2) 1,138k 642k 1,013k 940k
Consolidated ARPU $16.07 $39.52 $21.19 $32.06
Wholesale $3.52 N/A $4.46 $4.87
Retail $45.10 $39.86 $42.74 $41.58
Consolidated Churn 2.1% 3.6% 2.3% 3.2%
Wholesale 1.4% N/A 1.3% 3.0%
Retail 3.8% 3.6% 3.5% 3.2%
Consolidated CPGA $60 $499 $92 $112
Wholesale -- -- -- --
Retail $422 $624 $505 $442
Capital Expenditures $590MM $767MM $763MM $622MM
Covered POPS 117.1MM 44.7MM 70.5MM 62.2MM
Cash, Cash Equivalents
and Investments $1,751MM $3,892MM $1,394MM $2,272MM
(1) Includes non-launched markets.
(2) During the year, the retail subscriber base was reduced by 67k to
adjust for subscribers who have cancelled service but have not yet
returned
equipment and for aged involuntary deactivations, and 12k to remove
subscribers who reside in Ireland, which was sold in July 2010.
Management Webcast
Clearwire executives will host a conference call and simultaneous webcast to discuss the Company's fourth quarter and full year 2010 financial results at 4:30 p.m. Eastern Time today. A live broadcast of the conference call will be available online on the Company's Investor Relations website located at: http://investors.clearwire.com.
Interested parties can access the conference call by dialing 877.392.9886, or outside the United States at 707.287.9329, at least five minutes prior to the start time. A replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on February 17 until approximately 11:59 p.m. Eastern Time on March 3 by dialing 800.642.1687, or outside the United States by dialing 706.645.9291. The conference ID for the replay is 40334835
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