Clearwire May Need To Raise More Money As Buildout Costs Loom
Thursday 16 February 2012
Clearwire Corp. (CLWR) warned Thursday that it may need to raise more money--even after getting about $1 billion in the past two months--as it faces the hefty costs of building out a new fourth-generation mobile broadband network and the expected loss of sales at its Clear Internet brand.
Clearwire said in its annual regulatory filing that while it has enough cash--about $1.1 billion, including short-term investments--to last it through year's end, it may still need to raise more funds. The company also said it is poised to lose as much as 5% of its Clear brand growth as Time Warner Cable Inc. (TWC) and Comcast Corp. (CMCSA) halt sales of the service in favor of those offered by Verizon Wireless.
"We do not expect our operations to generate cumulative positive cash flows during the next 12 months," the company said. "We may need to raise substantial additional capital to fund our business."
Clearwire's disclosure that it may need to tap capital markets contrasts with the company's upbeat earnings call Wednesday afternoon in which Chief Executive Erik Prusch touted progress in discussions with new potential wholesale partners and a long-term agreement with Sprint Nextel Corp. (S), its largest customer.
Raising new funds may be an expensive proposition for Clearwire. The company was forced to pay a 14.75% coupon on a $300 million bond offering in January, more than 5 percentage points higher than debt issued by even lower-rated credits.
In its filing today, Clearwire said it won't be able to offer any more debt that's secured by its valuable network assets. That "may make additional debt financings more difficult to obtain on acceptable terms, or at all," Clearwire said in the filing.
A Clearwire spokeswoman declined to comment beyond the filing.
Clearwire shares fell 4.7% to $2.25 Thursday, despite gains by the broader market. Adding to investor concerns was a Wall Street Journal report that said AT&T Inc. (T) was in discussions with an array of wireless carriers to add additional capacity--but apparently not with Clearwire.
While Chief Financial Officer Hope Cochran boasted Wednesday that Clearwire has more wireless airwaves than the company can use, it may be difficult for the company to ink a deal with AT&T because of rival Sprint's nearly 49% stake.
Clearwire plans to spend about $600 million towards erecting a new 4G network on a technology known as long-term evolution, or LTE, over the next two years. That will help it compete with AT&T, Verizon Wireless and even partner Sprint, which are all rolling out 4G LTE services this year.
The most recent bond offering added another $45 million a year to Clearwire's interest burden.
Nonetheless, the Bellevue, Wa.-based company said Wednesday that it is nearing $200 million in vendor financing and is due a $600 million payment from Sprint this year for unlimited access to its existing 4G network, known as WiMax.
Wednesday, Clearwire reported a fourth-quarter loss of $236.8 million, compared with a $128 million loss a year earlier. Revenue rose to $361.9 million from $175.2 million.
It pared operating expenses to $795 million last quarter, from $1.2 billion a year earlier, cutting its work force to about 900, from 4,200 two years prior.
-By Greg Bensinger, Dow Jones Newswires; 212-416-4676; greg.bensinger@dowjones.com
I think we will see a trading range of 1.50-1.70 short term until long term fundamentals push the stock north again.
