UBS Investment Research
Deployment (and cash burn) kicks into high
4Q revenue growth accelerates, but EBITDA losses widen significantly
4Q pro forma revenue rose 34% (UBSe 27%) to $79.9M, accelerating from 13%
growth in 3Q. The company’s adj. EBITDA loss widened to $296M (UBSe -
$227M) vs. -$194M in 3Q. Clearwire added 10 cities to its covered footprint in the
quarter, incl. Chicago, Philadelphia and Seattle, bringing total covered POPs to
44.7M. The company also reiterated its target of 120M covered POPs by YE2010.
Retail net adds top estimates, but so does churn, CPGA; ARPU in-line
Total net adds (retail + wholesale) came in at 133K, up from 44K in 3Q. Retail
churn was 30 bps above our outlook at 3.6% (3.3%) vs. 3.1% in 3Q and 2.8% in
2Q. Monthly retail ARPU was $39.86 (in-line) vs. $39.71 in 3Q. Retail CPGA was
$624 (UBSe $589), up from $563 in 3Q, given expenses from new-market entry.
2010 net add outlook in-line with UBSe; Cash spend guidance may be low
For 2010, CLWR expects to triple its subscriber base to 2.1M, suggesting net adds
of 1.38M (in-line with UBSe). CPGA should remain flat with 2009 and below the
4Q number despite major market launches such as NYC, Boston, and Washington,
DC. To do this, mgmt expects net cash spend of $2.8-3.2B. Our model currently
suggests CLWR will spend almost $3.5B but cover 130M+ POPs by YE2010.
Valuation: Maintain Neutral
Our $8 PT is DCF-based (12% WACC, 3% perp growth). Given the risks from
increasing competition as wireless growth slows, we maintain our Neutral rating.
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Profitability & Valuation
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