August 4, 2010 / 8:32 PM / 9 years ago

UPDATE 3-Clearwire eyes new funding as it adds customers

* Q2 shr loss $0.61 vs shr loss $0.38 year ago

* Q2 rev $122.5 mln vs street view $131.93 mln

* 722,000 new subs beat estimates from at least 3 analysts

* May announce new funding in Q4

* Clearwire shares fall slightly (Adds analyst comments, share price update)

By Sinead Carew

NEW YORK, Aug 4 (Reuters) - Clearwire Corp CLWR.O posted lower-than-expected revenue for the second quarter even as customer growth beat estimates, and the wireless network provider said it is in talks to line up new investments or sell assets such as airwaves to fund future expansion.

The company also raised its target for 2010 customer growth, but shares of Clearwire — which is majority owned by Sprint Nextel (S.N) — fell slightly after the market’s close. The shares had risen 6 percent in regular Nasdaq trade.

“I would call the results mixed,” said Roe Equity Research analyst Kevin Roe, who was impressed by overall subscriber numbers but disappointed by direct retail growth.

Chief Executive Bill Morrow told analysts on a conference call that Clearwire could announce new funding by the end of the fourth quarter as he is in talks with new and existing investors about the potential for new funding.

He said the company could also consider raising debt or selling assets such as wireless airwaves it does not need.

Morrow declined comment on whom he is talking with about a potential spectrum sale but told Reuters that “some big important companies would like to have more spectrum.”

Clearwire’s two biggest rivals are AT&T Inc (T.N) and Verizon Wireless, a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).

While Clearwire has enough funding for the first phase of its network construction, the company has long said it would need more cash to go beyond its plans to cover to markets with more than 120 million customers by the end of this year.

“We’re not necessarily urgently pressed for time,” Morrow told analysts, adding that Clearwire would take as long as it needed to get the best terms in an agreement.

Besides Sprint, Clearwire’s investors include Comcast Corp (CMCSA.O), Time Warner Cable TWC.N, Intel Corp (INTC.O) and Google Inc (GOOG.O).

WHOLESALE GROWTH

Clearwire’s addition of 722,000 net new customers for the quarter was well ahead of the average estimate of 377,000 from three analysts, with estimates ranging from 282,000 to 500,000.

But the growth was strongest for wholesale customers, which bring in less revenue than Clearwire’s own direct retail customers. Clearwire added 127,000 direct customers compared with expectations of 150,000 and 172,000 from two analysts contacted by Reuters.

Morrow said a spurt of growth at a big wholesale customer very late in the quarter meant Clearwire had not been able to recognize revenue from all the new customers in the quarter.

As a result, while revenue almost doubled to $122.5 million it was short of analyst expectations for $131.9 million, according to Thomson Reuters I/B/E/S.

Analysts said the customer Morrow was referring to was Sprint, which uses Clearwire’s network for its fourth generation high-speed wireless offerings. Sprint launched a popular new HTC Corp (2498.TW) phone in June.

Clearwire announced a new wholesale customer, CBeyond CBEY.O, also on Wednesday and Morrow said he is working on bringing in more wholesale customers.

But Stifel Nicolaus analyst Christopher King said it may do better to focus on direct customers over wholesale customers.

“The economics are certainly more challenging in wholesale,” said King. “The jury is still out. We’re pleased with the subscriber growth in the quarter, but the extent to which it didn’t translate into revenue growth is something to keep an eye on.”

BTIG analyst Walt Piecyk was also impressed with Clearwire’s technology plans and its new forecast that it will end 2010 with 3 million customers, up from its previous target of 2 million.

Clearwire also announced it would test a new high-speed wireless network technology known as LTE. Its two biggest rivals also have plans to use LTE in their networks.

If Clearwire adds LTE technology to its network this should help it win more wholesale customers as LTE is expected to be more widely adopted than the WiMax technology that Clearwire uses today.

“The primary driver in this story is the build-out of networks and signing up of new customers. They seem to be delivering on both,” Piecyk said.

Clearwire posted a quarterly loss of $125.9 million, or 61 cents per basic share, compared with a loss of $73.4 million, or 38 cents per share, in the same quarter the year before.

This was in line with expectations from analysts polled by Thomson Reuters I/B/E/S.

Clearwire shares were trading at $7.11 in late trade after the news. The stock had closed on the Nasdaq at $7.16. (Reporting by Sinead Carew; Editing by Steve Orlofsky)

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