Clearwire - The Next Great Telecom?

In the world of telecom behemoths like Verizon (market cap 100 billion) and AT&T (217 billion), Clearwire is a midget (1.8 billion). Chances are you have never heard of the company. But you will. And the competitors had better look over their shoulder. Here is why. Clearwire Corporation builds and operates wireless broadband networks in the United States and Europe based on mobile WiMAX technology. It was founded by cellular telephone pioneer Craig McCaw in 2003. Other cellular companies like AT&T and Verizon offer so-called broadband wireless connectivity (e.g., EDGE) but these services pale in comparison to the speed and versatility of WiMAX. Unlike traditional cellular communication, Clearwire’s WiMAX network assigns IP addresses to each customer’s hardware allowing seamless integration with the rest of the Internet. Clearwire is poised to explodeThis means that technologies that use TCP or VoIP can run natively on such a network. Clearwire has already launched VoIP service in some markets. The obvious implication is that Clearwire’s WiMAX network coupled with VoIP outclasses traditional cellular communication networks making them obsolete. WiMAX also promises broadband speeds on par with cable internet service. Plus, there is nothing to prevent Clearwire from broadcasting video on a slice of the WiMAX spectrum. Consequently, Clearwire poses a threat to regional cable monopolies as well. Right now Clearwire’s network is limited to a handful of cities mainly in the western US, but with a host of WiMAX enabled internet devices showing up on shelves this year like a WiMAX enabled Eee PC (also look for a new computing device from Apple powered with Intel’s new Atom processor and WiMAX/G3 enabled Centrino 2 platform in 2008), Clearwire is poised to explode onto the scene. Mobile internet is the future and Clearwire is one of the only companies well positioned to fill the tsunami of demand that will arise in coming years.

Futhermockers Acts Like They Forgot About Sprint

While Clearwire’s business is built from the ground up around WiMAX, Sprint is a well-known telecom trying to migrate from their CDMA cellular network to WiMAX. Sprint is not as well positioned on the WiMAX frontier as Clearwire, but Sprint is the only large US cellular company investing heavily in WiMAX (they call their network XOHM). This is a bold move for a company that has taken a beating recently. Sprint is losing cellular subscribers and its stock is near a 20 year low. To add insult to injury, the company was forced to make a goodwill write-off of about 29 billion dollars in assets last quarter, about all the remaining value of Nextel which Sprint acquired a few years ago. But, with Sprint I don’t see a company on the edge of collapse. I see a company trimming the fat and making moves to leapfrog over the competition. Interestingly, Sprint and Clearwire have been in discussions (on and off again) about a possible network sharing agreement as they plan to build out their WiMAX networks. The most recent discussion includes a proposal from Intel to inject 2 billion dollars into the effort. The motivation for Intel is to sell WiMAX chips. They need a nationwide network on which their products will work. Look for some of those chips to appear in future iPhones and other (yet to be announced) Apple WiMAX enabled devices.