Clearwire's future: LTE, wholesale and cash worries

Clearwire can move from WiMax to LTE, the competing standard, in the future. And that future is most likely as a wholesaler---a 4G network provider behind the scenes enabling companies like Comcast and Time Warner Cable to sell wireless service.

There were a few things evident from Clearwire's most recent quarter (Techmeme). Among them:

Clearwire is technology agnostic. As noted before, Clearwire's network is set up so it can easily switch its antennas from WiMax to LTE in the future.

Bill Morrow, Clearwire of CEO, said the following on the company's earnings conference call. From the transcript in full:

There was an agreement before that was really a commercial deal between Intel and Clearwire that would restrict us from using anything other than WiMAX up to, I think it's February of 2012. That deal is no longer in effect. It's kind of this 30-day notice. So it does give us the flexibility that if we wanted to do a commercial launch of LTE or some other technology, that Intel would not be holding us back.

But I want to emphasize a couple of things. This is seen in a collaborative approach. We believe that technology needs to converge as we go forward and in the future there are so many similarities, probably an 80% overlap of LTE and WiMAX. So Intel, we believe, sees that too, and we all have to start thinking differently. In addition, you look at evolution and the silicon-based technology fronts, people are integrating more and more of this. So we don't have the technology wars in the future that we've seen in the past.

As far as your question on the cost of layering on LTE, I'll say that our models -- we're modeling a lot of this right now to see what is possible. We haven't made any decisions to go in either direction. Right now it's all about flexibility and focusing on what is here today.

Wholesale 4G is critical. The Clear brand shows some potential, but wholesale may be the future of Clearwire. Clearwire's network is behind Sprint's 4G as well as Comcast and Time Warner Cable. Of the 283,000 net new subscribers in the first quarter 111,000 of them were wholesale from partners. Most of these additions are 3G customers. Clearwire will collect more revenue when 4G services are fired up.

Cash burn is still a worry. When Clearwire's quarterly results landed I said to Sam Diaz: "You know this thing is starting to look like a real company." The metrics for Clearwire are all headed in the right direction. However, the company is burning through cash.

Stifel Nicolaus analyst Christopher King said Clearwire's capital spending was higher than expected and likely needs another $6 billion in capital to reach 250 million points of presence. In the first quarter, King said that Clearwire's net cash burn was $842 million in the first quarter. "While the company’s subscriber metrics have certainly turned a corner, we remain concerned about, what we view as, a potentially significant need for additional capital over the course of the next two years," said King.