AT&T’s Loss Offers Clearwire Hope That T-Mobile’s Business Will Be Its Gain
Clearwire is training its sights again on T-Mobile in an eager search to sign a second wholesale customer to join Sprint Nextel on its 4G network, said Chief Financial Officer Hope Cochran. The failure of T-Mobile’s sale to AT&T “did free up a lot of conversations,” she said late Wednesday at Citi’s investors conference in San Francisco. T-Mobile needs “capacity, they need spectrum, and they need an LTE path,” Cochran said. She left unstated Clearwire’s sales pitch that it can meet those needs, and she declined to discuss any communications between the companies.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
"We want to have another customer,” Cochran said, adding that “conversations are occurring, and we would agree that it’s an important step for the company.” Clearwire’s financial success depends on getting as much use as possible out of its network, she said. The company last year put in place the foundation for adding wholesale business by committing to move to LTE and showing the financial resources to follow through, she said.
"We'll have the money to build and run the LTE network,” Cochran said. She said $600 million in capital spending is needed to overlay the technology on the company’s core network and 8,000 of its cell sites, now used for WiMAX. Of that amount, $300 million must come from vendor financing, Cochran said.
Selling some of Clearwire’s abundant and increasingly valuable spectrum is another possibility, Cochran said. “A nationwide footprint keeps the value of the spectrum intact, but we're always willing to have conversations” about more localized deals, she said. Cochran said she expects any purchase to include some spectrum that Clearwire owns and some that it leases. Transferring leases is time-consuming, but has benefits for acquirers under FCC spectrum caps, she said.
A big network-sharing deal just landed with Sprint won’t look as good in Clearwire’s financial results as in its bank account, Cochran said. “Cash flow is what we optimized in the Sprint transaction, which is going to be different” from the effects to be booked in Clearwire’s profit-and-loss statement, she said. Sprint will pay this year about two-thirds of the $926 million it owes for WiMAX service and the rest in 2013, but accounting standards require Clearwire to record equal amounts, she said.
Clearwire’s retail operation will switch to selling customers devices instead of leasing them out, Cochran said without providing details. As a result, revenue per user “will plateau, maybe come down a little,” she said. But the change recognizes that there’s “more cash to be had there,” and it will help reduce the company’s cost of adding each customer, Cochran said. Clearwire could build the retail business “if we chose to invest” in marketing and sales, she said.