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Clearwire Q2 2010 Earnings Call Transcript

Clearwire Q2 2010 Earnings Call Transcript

Clearwire (CLWR)

Q2 2010 Earnings Call

August 04, 2010 4:30 pm ET


John Saw - Chief Technology Officer and Senior Vice President

William Morrow - Chief Executive Officer and Director

G. Sievert - Chief Commercial Officer

Erik Prusch - Chief Financial Officer

Paul Blalock - Senior Vice President, Investor Relations


Anthony Klarman II

Jonathan Chaplin - JPMorgan

John Hodulik - UBS

Walter Piecyk - BTIG, LLC

Sid Parakh - McAdams Wright Ragen, Inc.

Kevin Coyne - Goldman Sachs

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Simon Flannery - Morgan Stanley

Richard Prentiss - Raymond James & Associates



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Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Clearwire Financial Results Conference Call. My name is Alicia, and I’ll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today, Paul Blalock. Please proceed, sir.

Paul Blalock

Thank you, Alicia. Good afternoon, everyone, and welcome to Clearwire's Second Quarter 2010 Financial Results Conference Call. With me today are Bill Morrow, Chief Executive Officer; and Erik Prusch, our Chief Financial Officer, who will discuss Clearwire's second quarter results. As a reminder to all listeners, today's call is being webcast live on the Clearwire Investor Relations website and will be archived on that site and available for replay shortly after we conclude the call. Hopefully, you've all had an opportunity to read the release, issued a few minutes ago, which provides detailed financial information regarding our second quarter results.

Today's call may contain forward-looking statements reflecting management's beliefs and assumptions concerning future events and trends in our expectations regarding financial results. Forward-looking statements include, among other things, our future financial and operating performance and financial conditions, including projections and targets for 2010 and subsequent periods, subscriber growth, network development and market launch plans, strategic plans and objectives and the need for additional financing.

These forward-looking statements are all based on currently-available operating, financial and competitive information and are subject to various risks and uncertainties. Listeners are cautioned not to put undue reliance on any forward-looking statements, as they are not a guarantee of future performance. Please refer to our press release and our filings with the SEC for more information concerning the risk factors that could cause actual results to differ materially from those in the forward-looking statements. The company assumes no obligation to update any of these forward-looking statements.

And lastly, a reconciliation of any non-GAAP financial measures discussed today on this call can be found in our press release. I will now turn the call over to Bill Morrow.

William Morrow

Thanks, Bob, and good afternoon. Again, we want to thank all of you for your continued interest in Clearwire. And as you've heard us say many times before, we have expected 2010 to be a growth year, and I'm pleased to say that our strong second quarter is further evidence of this. Our all-IP network, our unmatched spectrum position and our ability to deliver data at a low cost continues to differentiate Clearwire and position us well in this high-growth emerging market.

Nearly all of the analytical data available supports the fact that mobile Internet continues to grow at considerably faster rates than the fixed Internet did. In particular, mobile computing broadband subscribers are projected to surpass all other types of Internet access by early 2013. It is increasingly clear that people want untethered broadband, and we believe that this trend will accelerate even more dramatically as 4G expands. And this, of course, will be good news for our company and for you as our shareholders.

During the quarter, we expanded our domestic 4G POPs by 37% to 56 million, so the growth of 15 million people. We launched several new markets, including Washington DC, St. Louis, Salt Lake City and Kansas City, among others. When adding our international operations and our pre-4G service, we covered a total of 62 million global POPs at the end of the second quarter. The larger footprint and the launch of the first 4G handset by our wholesale customer, Sprint, has led to a quarter-ending customer base of 1.7 million. This represents a 74% gain from last quarter with 722,000 net adds and is up 231% from just a year ago. Breaking this down somewhat, we saw our Retail base grow by 127,000 to 940,000, and our Wholesale base grow by 595,000 to 752,000.

As you can assess, our Retail segment is experiencing strong growth and our Wholesale segment is even stronger. When you consider where we are right now, I'm proud to tell you our Wholesale subscriber base has surprised the 1 million mark. And due to this higher-than-expected growth, we are updating guidance as we now believe we will end this year with approximately 3 million total subscribers, up from our previous guidance of just over 2 million. I'd like to emphasize a degree of caution in modeling as this projection includes a number of subscribers where their home-base market has yet to launch our 4G service. We do receive nominal revenue from these customers and believe it will increase as their home market is launched.

The subscriber growth has led to revenues of $123 million in the second quarter, representing a 15% improvement from last quarter and a 93% improvement year over year. And as Erik will explain, the vast majority of our revenue at this point is generated through our Retail channel.

In terms of customer behavior, we continue to see that while coverage is important, speed and capacity are king. The appetite for high consumption is evidenced by our mobile customers who continue to use more than seven gigabytes a month, and as you know, this is several times the amount of a typical 3G mobile data user. And while this level of data usage will be very important for us and the industry to watch, it does validate the advantage given to those carriers with the right technology and spectrum depth.

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