Key 2009 Highlights - CLEAR(TM) 4G in 27 Markets Across the U.S. Covering 34 Million People, including: Chicago, Dallas, Las Vegas, Atlanta, Philadelphia, Seattle and Honolulu
Total Fourth Quarter Subscribers of 688,000 including 642,000 Retail Subscribers and 46,000 Wholesale Subscribers from Comcast, Sprint, and Time Warner Cable Largest Net Add Quarter in Company's History;
Fourth Quarter 2009 Retail Subscriber Growth of 87,000 Outpaced First Three Quarters Combined
Total Subscribers in 4G Markets More than Doubled Sequentially to 438,000 at End of Fourth Quarter 2009
Revenue Increases 19 percent to $274.5 Million compared with Pro Forma 2008 Raised $4.3 Billion, including $1.6 Billion of Additional Financial Support from Strategic Investors, and Refinancing of Debt which Extended Maturity to Late 2015
Additional Highlights Serves as 4G "Network of Networks" Through Wholesale Launches of 4G Service by Comcast, Sprint, and Time Warner Cable Network Expansion Expected to Reach up to 120 Million POPs by End of 2010;
Concentration of New Launches to Occur Later in the Year; New 4G Markets to Launch in 2010 Expected to include New York, Boston, Washington, D.C., Houston, the San Francisco Bay Area, Denver, Minneapolis and Kansas City More than 30 Embedded 4G Devices Now Available - including Netbook and Notebook Computers
Clearwire Corporation (along with its subsidiaries, "Clearwire" or the "Company"), a leading provider of wireless broadband services, today reported its consolidated financial and operating results for the fourth quarter and full year ended December 31, 2009.
"Over the past year, Clearwire established its leadership in 4G mobile broadband services by building the largest 4G network in North America, raising additional financing to fuel our growth, supporting the 4G wholesale service launches for three of the most prominent communications companies in the U.S., and delivering solid financial results in a challenging economic environment," said Bill Morrow, CEO of Clearwire.
"Our all-IP network and unmatched spectrum holdings have truly enabled us to become the 4G 'network of networks.' We now provide the underlying capability to Comcast, Sprint, and Time Warner Cable to serve the growing demand for mobile broadband services, and we are well positioned to expand our wholesale business even further. When coupled with the success of our own CLEAR retail brand, record subscriber growth, and our extensive market build plans for this year, we are confident that we remain on a strong growth trajectory for 2010."
In 2010, the Company expects to cover up to 120 million people with its 4G network. Within this footprint, services will be offered under both the CLEAR brand name, and that of the Company's strategic wholesale providers which will vary across individual markets. The launches are expected to include top 100 markets such as New York, Boston, Washington, D.C., Houston, the San Francisco Bay Area, Denver, Minneapolis, and Kansas City.
During this year, the Company anticipates 4G subscriber levels to triple. The Company also expects retail cost-per-gross add (CPGA) to remain consistent with 2009 levels due to a significant number of market launches. In addition, the Company expects retail average-revenue-per-user (ARPU) to remain flat. The Company currently expects to have full year 2010 net cash spend between $2.8 billion to $3.2 billion.
The Company's current and future plans are subject to a number of conditions and uncertainties, including among others, its ability to manage ongoing market development activities, its performance in launched markets and access to additional funding.
Presentation of 2009 Fourth Quarter, Year End and Pro Forma 2008 Fourth Quarter and Year End Results
As previously disclosed, on November 28, 2008, Clearwire, Sprint Nextel Corporation, Comcast Corporation, Time Warner Cable, Inc., Bright House Networks, LLC, Google Inc., and Intel Capital completed the transactions contemplated by the Transaction Agreement and Plan of Merger (the "Transaction Agreement"), entered into by the parties on May 7, 2008. For accounting purposes, the transactions (the "Transactions") are treated as a "reverse acquisition" with the WiMAX business contributed from Sprint (the "Sprint WiMAX Business") deemed to be the accounting acquirer. As a result, the financial results of the legacy Clearwire Corporation ("Old Clearwire") prior to the consummation of the Transactions are not included as part of the Company's consolidated financial statements. The results for Clearwire for the three and twelve months ended December 31, 2009, are presented with the results of operations of the Sprint WiMAX Business for the three and twelve months ended December 31, 2008, on subsequent pages of this earnings release.
2009 Fourth Quarter and Year End Consolidated Results
Consolidated revenue increased by 34 percent to $79.9 million in the fourth quarter 2009, versus pro forma revenue of $59.7 million for the same quarter of 2008. The growth in revenue was driven primarily by Clearwire's larger subscriber base, including the addition of ten new markets year-over-year.
Total subscribers increased to approximately 688,000 at the end of the fourth quarter of 2009, up from approximately 475,000 on a pro forma basis at the end of the fourth quarter 2008. Total retail subscribers in the Company's 27 4G markets (both new markets and legacy markets recently upgraded to 4G service) were approximately 392,000 at the end of December. On a consolidated basis Clearwire added approximately 87,000 net new retail subscribers during the fourth quarter of 2009, more than the first three quarters combined. This fourth quarter increase included the addition of approximately 90,000 net new retail subscribers in the Company's 27 4G markets, which were partially offset by a modest net decline in subscribers in domestic and international legacy markets for the quarter.
Retail ARPU for the fourth quarter of 2009 was $39.86, an increase of $0.16 from the $39.70 pro forma retail ARPU level from the prior year fourth quarter and a sequential quarter increase of $0.15 compared to $39.71 reported in the third quarter of 2009. Retail ARPU increased due to an increase in bundled sales and mobile offerings, offset by an increase in promotional activity due to the large number of new customers.
Cost of goods and services and network costs for the fourth quarter ended December 31, 2009, increased 119 percent to $169.8 million compared to pro forma cost of goods and services and network costs of $77.4 million in the fourth quarter of the prior year period. This increase is due to increased tower rents as the Company expands its 4G network, combined with more equipment sales to customers and approximately $41 million related to write offs of customer premise equipment and network and base station equipment, and an increase in obsolescence and shrinkage allowance.
Selling, General and Administrative (SG&A) expense increased to $201.1 million in the fourth quarter 2009 compared to pro forma expense of $109.7 million for the fourth quarter 2008 as a result of significantly greater gross and net adds in 4G markets than the prior years. In addition, headcount growth impacted fourth quarter 2009 SG&A expense compared to the fourth quarter 2008. Ending headcount at December 31, 2009 was approximately 3,440 compared to 1,635 employees at December 31, 2008.
Adjusted EBITDA for the fourth quarter of 2009 reflected a loss of $295.7 million, versus a similar pro forma Adjusted EBITDA loss of $151.0 million for the same period in 2008.
Higher network expansion activities led to an increase in Capital Expenditures (or CapEx) to $767 million in the fourth quarter of 2009 from pro forma CapEx of $83 million in the same period in 2008. Approximately $200 million of the 2010 network build costs were accelerated and pulled into 2009 CapEx spend. Cash spent on operations and CapEx was $823 million for the fourth quarter of 2009, and $1.97 billion for the twelve months ended December 31, 2009. This was offset by a net increase of approximately $2.7 billion in net capital raising in Q4'09. Clearwire ended December 2009 with cash and short-term investments of approximately $3.8 billion invested primarily in U.S. Treasury securities.