Clearwire: 'Google believes in us'

Clearwire has a larger war chest, but still lacks a significant subscriber base for its WiMax, or 4G, wireless services. However, the company maintains that it is in the right place at the right time to become a powerhouse.

Those were some of the takeaways as Clearwire CEO William Morrow put on a confident front on the company's third quarter earnings call on Tuesday. Morrow addressed why Google sat out the latest $1.56 billion funding round and how the wholesale business---Time Warner Cable and Comcast reselling WiMax service---will be huge.

The big question here is whether you buy Morrow's confidence. Clearwire is forging ahead into new markets in the fourth quarter and continues to have an aggressive build-out plan for 2010. Clearwire is entering the following markets by the end of the year: Atlanta, GA; Baltimore, MD; Boise, ID; Chicago, IL; Las Vegas, NV; Philadelphia, PA; Charlotte, Raleigh, and Greensboro, NC; Honolulu and Maui, HI; Seattle and Bellingham, WA; Portland and Salem, OR; and Dallas/Ft. Worth, San Antonio, Austin, Abilene, Amarillo, Corpus Christi, Killeen/Temple, Lubbock, Midland/Odessa, Waco and Wichita Falls, TX.

Among some of the key items:

Morrow on Google and why it didn't participate in Clearwire's latest funding round:

I’ll deal with the Google issue right up-front -- there’s been some questions and even some already reports out there on the street, on main street about why Google didn’t participate. You know, Google believes in us and they are supporting us from a product management point of view, from a strategic point of view. You know, they have been great about us understanding what are the Internet trends that exist. They have put $500 million into the company when this thing got going which was the largest -- one of the largest investments they have ever made into a different company. So the fact that they are not participating on it partly relates to this is how they can better support us, and so I wouldn’t read anything negative into that whatsoever.

Morrow on the importance of Comcast, Sprint and other wholesale partners on selling WiMax service:

Our wholesale partners comprise the largest channel for us to access customers and we believe it represents a very meaningful future revenue opportunity for Clearwire. Their distribution channels have provided access to a base of over 100 million existing customers between them, most of which are candidates to be cross-sold a 4G data product on the Clear network.

Morrow on the future:

We continue to believe that we are in the right place at the right time. If ever there was a rising tide that is lifting all boats, this is it. As I’ve said before, we don’t have to unseat any of the giant telcos in order to be successful. I am more confident than ever that we will gain our fair share of this brand new market opportunity.

A few thoughts:

• I'm not sure that Clearwire can get by without unseating a few Verizon and AT&T wireless broadband accounts. The consumer only has so much income. And while 4G service is fine its reach is tethered to the big markets Clearwire has targeted. Meanwhile, LTE, a rival 4G technology, is being pushed by Verizon, which competes in most of Clearwire's markets.
• Clearwire said it was confident that it could got back to get more financing in the future. Clearwire will be an important company because it will build out WiMax infrastructure. It remains to be seen whether Clearwire actually makes money.
• The bottom line is that Clearwire's user base is small. The company added 44,000 net customers in the third quarter. It's too early to pan those figures yet given Clearwire is rolling out a bunch of new markets. However, this time next year Clearwire will need to show a lot more than 555,000 subscribers on the books.