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Clearwire Corporation (CLWRD) Message Board

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  • bjspokanimal bjspokanimal Nov 11, 2010 7:53 PM Flag

    Hesse Attempts to Dispel Concerns over Clearwire's Future

    ... I'm much more into "inevitabilities" than I am into timing things. Warren Buffet once said that "nobody can time the market but I know value and opportuinity when I see it and I know irrational exhuberance when I see it and act accordingly"...

    ... I feel the same way and I try, with every investment I make, to emulate the vast array of famous contrarians who fill our history books... Rothschild, Lynch and Templeton, to name a few.

    I would hope that by June that CLWR would cut their quarterly losses to 2/3 what they are now and be up to 7 or 8 million subscribers... which I think bulls and bears agree will have to be 95% wholesale adds. I would also hope they'd have sufficient working capital to last until the end of 2012 by then and have their revenue squabbles with sprint worked out by then.

    If all that were the case by then with 10% dilution and some concessions re: competing in the retail channel and a small amount of their least-necessary spectrum out the door, I hope they'd be a $10 to $15 stock by then.

    The main thing is: This stock is WAY short of being overvalued given it's essential role in Sprint's future and it's price being just 27% of book value...

    ... great value with good potential and a reasonably essential industry role... that's what I look for in any contrarian play.


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    • Suppose CLWR did have 7-8 million wholesale subs. What's that going to change? They'd have the dilution but still not be close to generating FCF and they'd still have to rely on investor's cash to survive.

      Read my earlier post on CLWR's forecasted market penetration to achieve positive EBITDA.

      Lets assume that CLWR were to get the entire $9/mo ARPU wholesale that's disputed. Its still not enough for CLWR to produce FCF within any reasonable time frame that its capitalization will allow even if it raised several billion more.

      In early 2009 CLWR said it expected to achieve positive EBITDA with "mid double digit" market penetration (lets assume CLWR hinted at 5%) and at the time CLWR's consolidated ARPU was roughly $40/mo. Today CLWR covers about 100M POPs, has about 3% market penetration but today has an ARPU of between $9/mo or $4/mo. So with $4-$9 ARPU instead of $40 what market penetration is required to positive EBITDA?

      If one considers just top line revenue numbers CLWR estimate is off by a factor of 10 in the worst case, meaning CLWR might need 50% market penetration to be EBTIDA positive. In the best case they need 25% market penetration.

      There's no realistic scenario CLWR can achieve those levels of market penetration in the current environment, but even IF they did positive EBITDA is still not FCF so CLWR will require outside capital to continue survive.