Clearwire rallies on subs growth, MetroPCS deal talk

NEW YORK Thu Oct 13, 2011 5:03pm EDT

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NEW YORK (Reuters) - Clearwire Corp reported CLWR.O better-than-expected subscriber numbers on Thursday, while MetroPCS Communications PCS.N said it is interested in spectrum deal with the wireless telecommunications company.

The numbers and Clearwire's preliminary third-quarter results, seemed to ease concerns about the company, which has been the subject of bankruptcy speculation.

Shares in Clearwire, which is majority-owned by Sprint Nextel (S.N), rose 26 percent. They had lost about a third of their value last Friday after Sprint, Clearwire's biggest customer, said it could benefit from a Clearwire bankruptcy.

This comment and Sprint's announcement that it will not sell phones that run on Clearwire's WiMax network after 2012 led to fears that Sprint no longer wants to support Clearwire.

Besides the subscriber numbers, Clearwire also reported a strong-than-expected cash position.

Also on Thursday, MetroPCS' finance chief told an investor conference that his company was "uniquely positioned" to make a spectrum deal with Clearwire.

A MetroPCS spokesman said Clearwire is just one option, but investors saw the comment as positive.

"A wholesale agreement with MetroPCS would be a significant positive for Clearwire," CreditSuisse analyst Jonathan Chaplin said in a research note.

Clearwire has said it is in talks with U.S. operators about renting space on its network, particularly where there is a high demand for services like mobile Web surfing. It has also said that it would entertain offers to buy its spectrum.

Clearwire depends almost entirely on subscriber growth from Sprint, which uses Clearwire's network for its high-speed wireless offerings. Chaplin said Clearwire needs more wholesale partners because Sprint is planning to upgrade its network to lessen its dependence on Clearwire.

Nelson said the wholesale numbers gave him confidence that Sprint will need to work with Clearwire in the future, said Mizuho analyst Michael Nelson.

STRONG GROWTH, SPECTRUM INTEREST

Clearwire expects to report 1.9 million new net wholesale customers for the third quarter, compared with the average estimate for 1.4 million from four analysts.

Clearwire, which needs about $1 billion in fresh funding to support its operations and upgrade its network, said cash and equivalents fell to $700 million on September 30 from $848 million at the end of June. That beat analyst estimates for less than $600 million.

The stronger than expected numbers should buy Clearwire some time to improve its viability, analysts said.

"The longer they can extend the runway, the more likely they can have success in raising additional capital," said Nelson.

Clearwire's forecast implied a loss of less than $54 million, according to Nelson, who had estimated a loss of $104 million before interest, tax, depreciation and amortization.

Clearwire has said it wants to raise up to $300 million to support its operations, and $600 million to upgrade its network to catch up with competitors.

Clearwire, which is finalizing its third-quarter report, estimated its subscriber count at 9.5 million at the end of the quarter. In August, it raised its 2011 year-end target to 10 million subscribers from 9.5 million.

The company expects to report third-quarter revenue of $332 million, up 126 percent from a year earlier.

Clearwire shares closed up 35 cents, or 27 percent, to $1.65 on Nasdaq. Sprint shares closed up 8 percent at $2.78 on New York Stock Exchange. MetroPCS shares closed up almost 5 percent at $8.94.

(Reporting by Sinead Carew. Editing by Lisa Von Ahn, John Wallace and Robert MacMillan)

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