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McCaw's Mystery Millions

Craig McCaw's latest wireless venture Clearwire LLC has raised an additional $260 million in funding, which is nice, but the big question is how the wireless broadband service provider will spend its millions?

As widely reported, papers filed with the Securities and Exchange Commission (SEC) show that the company has raised $260 million via a debt offering, and could double that amount to $520 million if required.

But what does Clearwire need so much cash for? And how will it spend the money?

Apparently these are the kind of questions that Clearwire isn't answering... or at least not yet, since the company hadn't responded to Unstrung's enquiries by press time.

So here's what we know:

Clearwire is building out a wireless broadband network for consumers in the U.S., parts of Europe, Canada, and Mexico. It is using so-called "pre-WiMax" networking equipment from its subsidiary NextNet Wireless Inc.

The firm has launched its consumer wireless broadband service in a number of small towns and cities in the U.S. and plans to open up more markets by the end of the year. Recently, Clearwire has also been aggressively expanding in Europe, launching services in Belgium, trials in Ireland, and plotting a move into Denmark (see Clearwire Expands in Europe). The firm also has plans to offer services in Canada and Mexico City (see Who Makes What: WiMax Equipment & Services).

But while Clearwire has so far made impressive headway in opening up new markets fast, it will soon face much tougher competition from incumbent operators like BellSouth Corp. (NYSE: BLS) and Sprint Corp. (NYSE: FON) in the U.S.

Jack Gold, analyst at the cleverly-named J.Gold Associates says that Clearwire will need a lot of cash to establish its position as the major players start to rollout WiMax -- or WiMax-like -- services.

"They have to expand fairly rapidly if they want to consolidate their market position, as many competitors will enter this market," he writes in an email reply to questions.

"They need to be like AOL was -- get stuff built and out to potential customers in big numbers, or risk losing out to major players that could enter the market. They are not really well known yet, and have to build a market presence to establish position."

Gold thinks that to do this Clearwire will have to break out of the small town markets it has so far established in the U.S. and go for the major markets in order to grow fast:

"They absolutely want to expand to larger markets, improve their installed equipment, and move to standard WiMax equipment as soon as it is available. So, the money will probably go to tower builds and CPE device acquisition. If they go into the major markets, they will have to put up a significant amount of towers to cover a fairly large metropolitan area, so my guess is, that is why they are stocking their war chests."

Gold doesn't think that the money will be spent on spectrum acquisitions in the U.S. "This is not much money if they really want spectrum," he reckons.

But looking at the company's European strategy it is clear (geddit?) that the firm could use some of this cash to acquire broadband wireless licenses on the old continent.

Consider Clearwire's approach in Denmark:

In May 2004 a company called Flux Europe S.a.r.l won an auction to deploy fixed-wireless services in greater Copenhagen, at a cost of 1.6 million Danish kroner ($267,205). According to a report from the Danish National IT and Telecom Agency, in November 2004 Flux asked the agency “to approve a transfer of the company’s regional FWA licence to a new wholly owned Danish subsidiary called Clearwire Denmark ApS.” The request for transfer was approved on November 17, 2004.

And last month Clearwire invested a reported 100 million Danish kroner ($16.7 million) in local fixed-wireless operator Danske Telecom A/S in a deal aimed at deploying broadband wireless services in the 3.5GHz spectrum band.

Unconfirmed rumors suggest that Clearwire is interested in deploying services in Bulgaria, Germany and Italy, where it could presumably employ similar tatics.

— Dan Jones, Site Editor, Unstrung

joset01 12/5/2012 | 3:04:12 AM
re: McCaw's Mystery Millions No sign of these folks in Asia yet as far as I know, I wonder if a partnership deal would make most sense there?

DJ
bjorn001 12/5/2012 | 3:04:05 AM
re: McCaw's Mystery Millions Instead of doing a wifi deployment in subways, why not take direct thrust at the NYC transit system and beat the big boys to it and do it with WiMax. thats what i would do when all eyes are focused on intl market and strategies.
jasonm 12/5/2012 | 3:04:04 AM
re: McCaw's Mystery Millions McCaw sits on the board of China Unicom but that business is slated to broken up amongst GSM and CDMA assets. The big problem is spectrum allocation in China. It is expected to come out later this year and should fit into WiMAX spectrum profiles. It is likely the spectrum will go to the big guys like China Mobile and even the wireline guys like China Netcom...not upstarts. There is one upstart group in China that already has access to 3.5Ghz spectrum perfect for WiMAX but most of the others sit on spectrum like 1.8Ghz and have to go with so-called "pre-WiMAX" gear.
joset01 12/5/2012 | 3:04:04 AM
re: McCaw's Mystery Millions They may not own the spectrum to do that. All of the Nextnet gear works on 2.5GHz to 2.686GHz, that's licensed spectrum, which McCaw owns a chunk of for sure. But -- from a quick search of the FCC database -- its not exactly clear how much and where.

DJ
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