Clearwire Exits the Postpaid Mobile Broadband Arena

| Nov 2, 2011 | Consumer Services U.S.
| Analyst: Deepa Karthikeyan

Event Summary

October 31, 2011 -- Current Analysis has noted via its daily tracking activity that Clearwire no longer offers postpaid broadband plans to new customers. Instead, it will only offer a single unlimited prepaid WiMAX plan, dubbed ‘4G Mobile,’ for $50 per month. Clearwire will also stop selling dual-mode 3G/4G devices, and it will only sell WiMAX devices moving forward that access its network alone. Existing customers will be able to keep their postpaid and 3G/4G services and devices.

Quick Take

Analytical Summary

• Current Perspective: Negative on Clearwire’s decision to discontinue its postpaid broadband plans, which is in line with the carrier’s recent statement that it wishes to concentrate more on its wholesale business, as it will negatively impact its ARPU levels. (Its retail monthly ARPU stands at $47.05, as opposed to its wholesale ARPU, which is $6.20). The withdrawal also leaves it with just a single mobile broadband plan option, severely compromising its variety quotient and ability to generate revenue. Furthermore, the carrier’s bundles (home Internet and mobile Internet) offer no financial incentives to the user, which will do little to curb churn levels. While the unlimited 4G mobile broadband plan will continue to appeal to users in relevant markets (since there are no parallels to the plan), the revenues derived from it are unlikely to be sufficient to make up for Clearwire’s capital expenditure (close to $3 billion) spent over the past two years.

• Vendor Importance: High to Clearwire, as the move signals a major re-shuffling of its business model with significant repercussion on its revenue source. While a greater emphasis on wholesale consumers will help curtail any losses the carrier might have experienced on the retail side, the decision has made it a weaker player in the mobile broadband arena, with just a single offering which will only be compatible with a network that is not shared across the globe, particularly with emerging markets driving mobile WiMAX as a fixed and portable technology. LTE is on course to be the dominant 4G standard, and while Clearwire has indicated that it is willing to make the shift, it is unclear how quickly (and if) it can accrue the requisite capital.

• Market Impact: Moderate on the wireless services market, as Clearwire’s withdrawal of its postpaid broadband plans puts the final nail in the coffin for true unlimited 4G broadband postpaid plan options in light of Sprint announcing that it will cease to offer its users unlimited 4G broadband access starting November 2011. While the $50 ‘4G Mobile’ plan is still unique in its category (prepaid 4G mobile broadband), the fact that it is based on a network which is not ubiquitous will do precious little to elicit a response from rival carriers.

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