WiMax operator Clearwire has been struggling to fund build-out of its 4G WiMax network, recently laying off 15 percent of its workforce and announcing a $1.1 billion debt offering to raise money. However, reports are now circulating in the Wall Street Journal (subscription required) and elsewhere that the company is looking to get out of the retail business—offering WiMax modems, hotspots, and notebook cards to consumers—and instead focus on offering wholesale services to clients who would rebrand the service for sale to consumers.
The move could be a benefit to wireless operator Sprint, which owns a 54 percent ownership stake in Clearwire, and is the only major U.S. mobile operator offering WiMax service. If Clearwire were to get out of the consumer retail business, that would largely leave the consumer market to Sprint and its 4G products; Clearwire instead would focus on selling services at a wholesale level to ISPs, telcos, and other potential customers. Sprint has long been at odds with Clearwire’s strategy, complaining that the company charges Sprint too much for WiMax service, and competes against it in the consumer marketplace.
Industry reports and Clearwire’s previous financial reporting indicate that the bulk of the company’s revenue currently comes from its retail business, with the company earning about 10 times as much revenue from a retail customer as from a customer brought to WiMax through a wholesale service, such as Sprint’s 4G offerings.
Clearwire currently operates about 140 retail locations in the United States. There’s no information available as to whether Clearwire would shutter existing stores, although reports have the company scaling back retail operations gradually, including reducing expenses for advertising. Clearwire is expected to report its quarterly earnings on February 17; it would be a natural opportunity for the company to announce shifts in its retail strategy.
Both Clearwire and Sprint have indicated they’re looking at operating both WiMax and LTE 4G services.
