How Clearwire Is Outsmarting AT&T and Verizon

Clearwire (Nasdaq: CLWR  ) is surely putting up a good fight for survival. This otherwise loss-making company has now taken on biggies such as AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) in the wireless Internet space. This has largely been made possible by its clients that are offering cheaper data plans that are targeting the young and not-so-financially-well-off.

So does that mean good times ahead for Clearwire? Let's find out...

For instance, one of its customers -- NetZero -- introduced free wireless Internet services amounting to 200 megabytes per month for up to a full year, subject to certain conditions. Another Clearwire wholesale customer, FreedomPop, is also hoping to give the guys at Ma Bell and Verizon sleepless nights. The company is selling a unique case meant for Apple's iPhone that gives users access to 1 gigabyte of data. The case has an integrated WiMAX data receiver, and can be used as a Wi-Fi hotspot, which enables the phone to have Internet access.

So how is all this helping Clearwire?
Clearwire depends on revenue from clients such as FreedomPop and NetZero, so naturally if they are successful in attracting customers, it would translate into further use of Clearwire's WiMAX network -- generating more revenue for the cash-strapped company.

Clearwire also possesses the distinct advantage of having a large quantity of unused 2.5 GHz spectrum, mostly in congested, high-traffic-generating areas -- something that Verizon and AT&T have woefully fallen short in. In fact, Verizon has warned in recent FCC filings that it would not be able to meet the growing demand for mobile broadband services (read: 4G) by the year 2013 in some areas and by 2015 in many other locations. One man's loss is another man's gain, as they say.

Growing usage
What also works in Clearwire's favor is the fact that its customers seem to have a voracious appetite for data, as usage of its wireless network jumped by a whopping 705% in 2011. What's significant is that this growth was not only derived from new subscribers, but also from existing ones who apparently used more data every month.

Add to this the misfortunes of LightSquared, which have also played out in favor of Clearwire in the form of even more clients and reduced competition, and you have further reasons to smile. With the cancellation of the Sprint-LightSquared deal, Clearwire grabbed the opportunity to tie up with Leap Wireless and Simplexity, both ex-LightSquared customers.

The Foolish bottom line
The increase in revenue would certainly provide a boost to a company that is in the process of overlaying its WiMAX network with almost 8,000-odd TD-LTE sites, hoping to enhance the capacity of its existing spectrum. At the same time, the company now seems to be one step closer to finally recording a profit. This gives me further hope that there is definitely light at the end of the tunnel for Clearwire.

Clearwire is just one of the players in the race for wireless Internet dominance. Every now and then, we come across a stock that has us so excited that we can hardly contain our investing enthusiasm. We've uncovered one such pick with so much promise that we've dubbed it "The Motley Fool's Top Stock for 2012." This report highlights a company that is revolutionizing commerce in Latin America, and you can get instant access to the name of this company by clicking here to download it now.

Add Clearwire to your free Watchlist now!

Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool has a disclosure policy.We Fools may not 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.


Read/Post Comments (4) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 12, 2012, at 2:31 PM, spokanimal wrote:

    Although you cite a number of reasons to be optimistic about Clearwire, I would caution you on the use of your phrase: " the company now seems to be one step closer to finally recording a profit".

    While it's true that Clearwire became EBITDA positive for the first time in it's history in Q4, 2011, the company has since re-written it's contract with sprint for WiMax from one that compensates it nicely for volume increases... to one that is fixed in price at a level that would preclude an encore as an EBITDA positive company anytime this year.

    Still, Clearwire's potential remains... not just via all the partners you cite (NetZero, FreedomPOP, Leap and Simplexity) but also from it's push into TD-LTE. One needs to remember that once Clearwire's broad spectrum channels are applied to "LTE-Advanced" technology beginning in 2013, real-world speeds that are well in excess of 100 megabits will be possible with devices that can accomodate it...

    ... and such speeds, and spectrum capacity, will dwarf those of Verizon and AT&T by as much as 800 to 1,000 percentage points in the geographies that Clearwire will be operating in.

    Spokanimal

  • Report this Comment On April 13, 2012, at 9:38 AM, motleyinfo7 wrote:

    CLEAR 4G ( http://www.express4g.com ) is pushing hard right now into LTE and with LTE lit up in 80+ metro areas by fall it will be all set for the iPhone 5 and at that time you will be able to connect your iPhone directly with WiMax service from CLEAR 4G with it's $35 plan and get unlimited data and unlimited voice through handfull of VOIP providers such as Line2 and Google Voice.

    CLWR is a strong buy right now with potential to grow 200-300% if you are patient for the next 12-18 months.

  • Report this Comment On April 16, 2012, at 6:25 PM, French76 wrote:

    Ive been gun ho on Clearwire for a while now! Watching it closely especially since Sprint signed the contract with them and getting even more excited since Clear and others have signed on. The signs are (IMO) there for this company to surge % big time as one other poster put it "if you can hold for 1-2 yrs." I seriously doubt you will regret it, and at the current 1.92 per share price, OMG I plan on celebrating in the near future. It was hard holding off for just the right time to purchase since it kept jumping between 2.10 and 2.35ish but at sub 2's i JUMPED on it.

    Good luck to all those that believe in this company and happy partying in the future!!

  • Report this Comment On April 17, 2012, at 12:08 PM, gerard6656 wrote:

    I think once Clearwire publishes it March balance sheet you will find it is not cash strapped. Look back at its headlines.

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