Clearwire: Don't Count Us Out Yet

Clearwire (Nasdaq: CLWR  ) has been entombed with Sprint Nextel (NYSE: S  ) in so many stories about Sprint's own mishigas that it becomes difficult to see what Clearwire's own strengths are. But Clearwire CFO Hope Cochran, speaking this week at a conference sponsored by Goldman Sachs, said her company has the resources that even the top national wireless carriers should envy.

Cochran pointed out that Clearwire's network usage jumped more than 700% in 2011. The important thing to note here is that most of that data torrent was driven not by new subscribers, but by existing subscribers greatly increasing their data usage. "Customers are finding more applications and downloading more videos," she said.

Clearwire's strategy
This, according to Cochran, will be the Achilles' heel for AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) , as well as for Sprint.

Her estimate is that the LTE network that Sprint will deploy (Sprint says it will launch its LTE network in mid-2012) will be able to handle only 5.6 terabytes of data per site per year. AT&T and Verizon, which operate in a different frequency range, will have 22 terabytes per site per year capacity.

Clearwire's network carries 22 terabytes today. The company has 16,000 WiMAX cell sites and plans to also install LTE capability on half of those. That means Clearwire should have a tremendous amount of surplus capacity available. So when the big carriers run out of their capacity -- and Cochran thinks that will be sooner rather than later -- the big mobile carriers will have to divert their LTE traffic to Clearwire's network.

Verizon, trying to win approval for its big spectrum purchase last December, told the FCC in a filing that the spectrum it now holds will just not be sufficient. "By year-end 2015 our LTE data traffic is projected to be 5 times the peak data traffic ever carried on our 3G EV-DO network. The impact of that growth rate compounds, resulting in a more than 20-fold increase in LTE data traffic from year-end 2011 to year-end 2015."

If Clearwire can manage to keep its head above water until Verizon and AT&T do reach the end of their spectrum -- and Clearwire's future is still very much dependent on its relationship with Sprint -- the network may indeed be able to reap rewards from the insatiable needs of the major carriers' subscribers.

As Cochran told the conference, "We see our own trends, and that is the appetite for data is tremendous."

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Fool contributor Dan Radovsky owns shares of AT&T. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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  • Report this Comment On March 23, 2012, at 11:19 PM, Aryabod wrote:

    If you believe in the following two principles then Clearwire is surely a ten bagger, especially now since L2 has not been sanctioned to use its spectrum, hence Clearwire will be the sole wholesale provider with sufficient spectrum to alleviate the impending spectrum crunch.

    1. Spectrum is a finite resource

    2. Demand for Data is growing geometrically.

  • Report this Comment On March 24, 2012, at 12:20 PM, zanajohn1 wrote:

    Despite these facts about spectrum usage and CLWR capacity, which have been known for some time now, S treats CLWR as stepchild. There is some deep seated, unrevealed problem between the two. Maybe it's personal, but nothing can seem to change it.

  • Report this Comment On March 24, 2012, at 2:35 PM, spokanimal wrote:

    I would add that Clearwire has concentrated it 16,000 sites in high population density areas (eg: inner cities) where demand per square mile is greatest, and other carriers will run out of capacity the soonest.

    Further, in order to mitigate the inferior propagation (penetrating ability) of their 2.5ghz frequency, Clearwire has built those geographies much more densely (eg: smaller cell radius) than other carriers have.

    The silver lining: with higher density/small radius infrastructure in those areas, Clearwire not only has far more spectrum capacity, they ALSO have more capacity per cell site given that each site serves fewer POPs.

    They essentially have unlimited capacity is exactly the geographic areas where other carriers are going to experience capacity constraints the soonest.

    Spokanimal

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