Clearwire to shift focus to wholesale from retail

NEW YORK, USA: Wireless operator Clearwire Corp is planning on shifting its sales strategy away from retail consumer services toward wholesale clients, according to two people familiar with the matter.

The company will instead look to conserve cash for building its high speed network, according to one of the people familiar with Clearwire's thinking.

But such a strategy move would take some time for Clearwire, which operates 140 stores around the country, according to the sources who asked not to be named as the company has not made any announcements.

A representative for Clearwire declined to comment but said the operator would provide investors an update on its plans when it reports quarterly earnings on Thursday, Feb. 17.

One of the sources said that while it would be difficult for Clearwire to get out of lease agreements for its stores it could instead pull back in areas such as advertising in order to prioritize spending on expanding its network.

"It's more about not putting any more investment into areas like new ads," the person said.

Clearwire is 54 per cent owned by Sprint Nextel, which rents space on Clearwire's network to offer its own customers high speed services.

Sprint has said openly that it disagreed with Clearwire's retail strategy because it is too expensive to maintain. The companies, which compete against each other for retail customers, are also locked in a dispute over how much money Clearwire is charging Sprint on the wholesale side.

Clearwire said in November that it would scale back on its retail expansion by cutting back on advertising and not opening stores in certain new markets because of a cash shortage.

Even after the company raised $1.3 billion in debt in December, the retail cutbacks have remained in place.

Clearwire, which still needs billions of dollars more to complete its networks, has said it is looking into other funding options such as a potential sale of wireless spectrum.

But so far the company has stopped short of pulling away entirely from retail, which generates most of its revenue.

In the third quarter, Clearwire's average revenue per retail customer was $42.74, while customers of wholesale providers such as Sprint brought in $4.46 per month on average.

According to a Wall Street Journal story on Wednesday that cites unnamed sources, a move away from retail could pave the way for a new funding deal with Sprint.

The story said Clearwire is turning its focus to becoming cash flow positive as soon as possible, but it cited one person saying that it could take a year to 18 months to get there.

While Clearwire was the first U.S. operator to provide services based on the latest generation of high speed wireless technologies, it is facing tough new competition from rivals such as Verizon Wireless, which kicked off its own high speed wireless services late last year.

Clearwire shares rose 2 per cent to $5.62 in extended trading after closing at $5.51 on Nasdaq.