Sprint just announced that they’re done selling new WiMAX devices this year in favor of going full throttle on LTE. Bad news for Clearwire as Sprint, their biggest investor and customer, resells their WiMAX service in seventy markets. As a result, Clearwire took a 30% dive and falling, closing in on penny stock territory as the news of the divestiture hit.
During the Q&A session of Sprint’s three hour shareholder update a lady pounded them (skip into the 2:40:32 mark here, it gets good) with questions on what happens to WiMAX users when Clearwire goes bust, why screw Clearwire in favor of spending ten times as much, I think, on LTE, and also lose Clearwire’s spectrum. That’s a good question, given that in the first half of the year Clearwire lost $1.2B and their total current assets as of that time were less than a billion, current assets meaning what cash they could drum up liquidating over a twelve month period. Sprint’s answer was to try to shut the lady up (“we’re finished, don’t want to comment”) downplay the question by telling her she didn’t have her facts straight and that there has never been a wireless bankruptcy that resulted in a blackout of service, said Hesse.
The thing with WiMAX is that nobody likes it including ambitious carriers on a budget as the name of the game, according to Sprint and common sense, is getting more subscribers. When you have the iPhone and a lot of subscribers from a hopeful influx and your other 4G phones in a place like New York City, it’s important to have the 4G technology that can handle the largest cluster of users in a given location over a given frequency bandwidth, which is called system spectral efficiency, and the award for that goes to LTE with a score of 16.32 versus WiMAX’s 1.2, the HSDPA/HSPA family at 8.44.
In other words if your fantasy is to get a lot of subscribers so that you don’t go under yourself, gotta pay up for LTE which in addition to being sexier to consumers can accommodate 13x more users per unit of physical space than WiMAX. And if you’ve got HSPA+, good for you, but that’s not going to cut the mustard in dense populations no matter how much backhaul or how many towers you stuff into a city when Verizon’s got the stuff to handle double HSPA+ and a dozen times as many users as WiMAX.
Clearwire’s short percentage of common shares is about 50%. Expect to read about them soon in chapter seven.