Clearwire Shows Earnings & Financing Hand (CLWR, S, CMCSA, TWC, DRWI)

Investors are getting a look at why Clearwire Corporation (NASDAQ: CLWR) announced that it was getting new partner financing ahead of its quarterly earnings report.  The wireless broadband services provider did show a gain in revenue to $68.8 million, up 13% from the $60.8 million a year ago and up from $63.59 million just in the June quarter.  Thomson Reuters had revenue estimates at just over $66.6 million.  The net loss of -$0.43 EPS was in-line with estimates.  Sprint Nextel Corp. (NYSE: S), Comcast Corporation (NASDAQ: CMCSA), and Time Warner Cable Inc. (NYSE: TWC), its strategic partners, are set to expand selling efforts in 4G areas. Today’s news also has implications for DragonWave Inc. (NASDAQ: DRWI).

The company had just entered into a definitive agreement with many of its strategic investors for $1.564 billion in equity funding for its planned network expansion.  Clearwire is now targeting total net cash spend of about $750 million in the fourth quarter of 2009, or about $1.9 billion for the full year 2009.  That is at the high-end of the $1.5 billion to $1.9 billion range previously offered.  The total cash and short-term investment balances were just under $2.0 billion and the new equity and debt funding commitments collectively total $1.8 billion if fully subscribed and completed as planned.

Clearwire has maintained its business outlook for 2009 and 2010, expecting consolidated average revenue per user to be generally sustained at current levels, but the company continues to expect that churn will increase in its pre-WiMAX market and that cost per gross addition will increase, particularly in the fourth quarter of 2009, as new markets are launched.

Deal terms are loosely given:

• about $1.057 billion within five business days,
• $440 million at a closing targeted to be completed by year-end 2009,
• and $66 million at a closing targeted to be completed during the first quarter of 2010.
• Additionally, about $240 million in debt funding has been committed to Clearwire by existing equity investors

Clearwire still is far short of being the nationwide wireless broadband provider, but it reaffirmed its 2009 consolidated network coverage target of more than 40 million people.  It noted that 30 million of that would be covered by the CLEAR 4G service in more than 25 markets by the end of 2009. The 2010 target will get this to as many as 120 million people by the end of 2010, pending the announced financing transactions.

This above-plan expansion may have been anticipated, but this would be solid for DragonWave Inc. (NASDAQ: DRWI) that recently raised capital in its US-debut listing.  Its shares were up only 0.2% at $9.22 today and its shares are up an additional 1.4% at $9.35 in the after-hours session.  As noted earlier, DragonWave is doing the build-out for much of the Clearwire expansion.  In fact, Clearwire was 77% of the last quarter’s revenue.

JON C. OGG