If the U.S. wireless communications market were a marathon, there would be two clear frontrunners: AT&T
I have a hard time finding where their confidence stems from. In the third quarter, Sprint lost another 801,000 post-paid subscribers (the most lucrative variety of customer in the wireless space), continuing a long running and disturbing trend. Hemorrhaging subscribers is not a good way to conduct a telecom business, especially when both of the companies you're trying to catch added subscribers in the same quarter you posted a loss. See the figures below:
Wireless Carrier |
Total Subscribers as of 3Q 2009 |
Percent Increase from 3Q 2008 |
---|---|---|
Verizon |
89 Million |
25.7% |
AT&T |
81.6 Million |
8.9% |
Sprint |
48.3 Million |
(4.6%) |
T-Mobile |
33.4 Million |
4% |
Source: Company filings. Verizon growth includes Alltel Wireless acquisition.
OK, so maybe Sprint's really six or seven miles back. Playing catch-up might be an easier proposition if Sprint had some significant advantage it could leverage, such as a strong handset lineup or a superior network. AT&T has demonstrated the subscriber-netting allure of a hot product with Apple's
Enter Clearwire
Clearwire
One of the keys to network adoption will be delivering the advertised speed consistently across the coverage area. Recently, a WiMAX forum (of which Clearwire took part) successfully demonstrated roaming in Taiwan, a big step forward in proving WiMAX viability as a mobile 4G solution. WiMAX has intriguing potential, as users with increasingly powerful mobile devices could simply connect to the broadband network for all their data needs, such as voice, text messaging, and mobile email. Traditional revenue generation for Tier-1 providers such as AT&T and Verizon comes from text messaging and voice users on 2G networks. A successful WiMAX network that offers users the same or increased functionality for a simple data fee could leave the old model completely out of the loop.
Should AT&T and Verizon be sweating?
In 2008, Sprint acquired a 51% stake in Clearwire. In addition, Sprint combined its existing 4G WiMAX infrastructure with Clearwire, accelerating the network build-out. The partnership also allows Clearwire to use Sprint's 3G network for additional coverage in areas where WiMAX has not yet penetrated.
Sprint has not so quietly been funneling money into Clearwire, banking on WiMAX as their 4G solution moving forward. They are joined by an intriguing consortium of financial backers, including Google
Clearwire added 44,000 net new subscribers in the third quarter, a paltry figure if it hopes to significantly increase revenue generation anytime soon. AT&T and Verizon have been quickly moving to build out their own 4G networks, based on the "long-term evolution" (LTE) technology that aims to dramatically increase the speeds of their existing 3G networks.
Sprint is hoping that it can beat everyone to the punch with its WiMAX initiative. While it has a lead now, Clearwire claims its WiMax network will cover 30 million users by the end of this year and 120 million by the end of 2010, that lead may be shrinking. Verizon recently announced it plans a nationwide 4G rollout next year that could cover 100 million people and effectively neutralize Sprint and Clearwire's aggressive first moves in the 4G market.
Sprint's officially on the clock. Unless Clearwire can increase the rate of subscriber adoption while building out a costly network, its all-in bet on WiMax might be too little, too late.