Rough week for Clearwire takes toll on stock price

Shareholder Time Warner Cable bails, while analyst warns of liquidity crisis
September 18, 2012 | By Fred Donovan

It's been a rough week for wireless broadband provider Clearwire, and it's only Wednesday.

First, Clearwire, which provides retail and wholesale mobile and fixed wireless broadband services, was slammed by Morgan Stanley analyst Simon Flannery, who warned that the company could face liquidity problems next year.

Second, it came to light this week that Time Warner Cable, a major shareholder, plans to sell off its 46.4 million shares of  the company. Time Warner Cable, it seems, has decided to go with Verizon (NYSE: VZ) Wireless as its wireless services supplier, according to a report by Bloomberg.

The double whammy drove down Clearwire's stock price by 10 percent on Tuesday. The stock has dropped 31 percent so far this year.

The company, whose biggest shareholder and largest wholesale customer is Sprint Nextel (NYSE: S), has been struggling financially for some time, despite having 11 million U.S. subscribers that use its WiMAX network, as of January 2012. The company has $4.2 billion in debt, its revenues are declining and it continues to post net losses.

Flannery expects Clearwire to burn through $1.3 billion in free cash next year, with just $42 million in the bank at the end of 2013, according to a report by Forbes magazine.

"We continue to believe that various forces will drive top line pressure to the wholesale segment, as well as retail, driving liquidity challenges in 2013. We believe funding will once again come under pressure in the second half of next year as Clearwire launches LTE," Flannery was quoted by Bloomberg as saying.

The one bright spot for Clearwire was a wholesale 4G agreement it signed with EarthLink last week. Using the wholesale capacity, EarthLink will initially target broadband wireless consumers for in-home use. Future product offerings will include mobile devices and new services for small business customers.

lkconsulting.net

262-290-5210