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Press Release -- August 3rd, 2011
Source: Clearwire
Tags: Construction, Equipment, Exchange

Clearwire Reports Record Second Quarter 2011 Results

  • Record Pro Forma 2Q 2011 Revenue of $293.7 Million, Up 151% From $117.0 Million, Year Over Year
  • Quarterly Net Wholesale Subscriber Additions of 1.5 Million Representing 31% Sequential Growth in Ending Wholesale Subscribers
  • $85.7 Million Sequential Improvement in Pro Forma Adjusted EBITDA

KIRKLAND, Wash., Aug. 3, 2011 (GLOBE NEWSWIRE) -- Clearwire Corporation (NASDAQ:CLWR, news, filings), a leading provider of 4G wireless broadband services in the U.S., today reported its financial and operating results for the second quarter 2011.

"This quarter we continued to build on our success with rapid subscriber growth and improving financial performance," said John Stanton, Chairman and Interim Chief Executive Officer of Clearwire. "Looking ahead, we will continue to seek funding to fuel our growth with the belief that our 4G network, growing customer base, unmatched and unencumbered spectrum, and notable wholesale partners put us in a uniquely advantageous position — one that we intend to maximize."

"During the quarter we made significant progress toward our objective of achieving positive adjusted EBITDA in 2012 as a result of dramatic growth in revenue coupled with continued reductions in our operating costs," added Erik Prusch, Clearwire's Chief Operating Officer.

Clearwire ended the second quarter 2011 with approximately 7.65 million total subscribers, up 365% from 1.64 million subscribers in the second quarter 2010. The subscriber base consists of 1.29 million retail subscribers and 6.36 million wholesale subscribers. During the second quarter 2011, Clearwire added 1.54 million total net new subscribers, comprised of 39,000 retail and 1.50 million wholesale net new subscribers. Clearwire's wholesale subscribers consist primarily of users of 3G/4G smartphone devices.

Second quarter 2011 aggregate network usage by wholesale customers increased 42% as compared to first quarter 2011, driven primarily by growth in aggregate smartphone usage, which increased 74% over the same period.

Second quarter 2011 reported revenue was $322.6 million. Consolidated pro forma revenue for the second quarter 2011 was $293.7 million, a 151% increase over second quarter 2010 revenue of $117.0 million. In the second quarter 2011, retail revenue and other revenue was $191.1 million and retail average revenue per user (ARPU) was a record $47.59. Pro forma wholesale revenue was $102.6 million in the second quarter 2011, or $6.18 in pro forma wholesale ARPU.

Consolidated pro forma revenue and pro forma wholesale revenue exclude approximately $16.1 million of revenue related to wholesale services provided by Clearwire to Sprint in the first quarter 2011, and approximately $12.8 million of a $28.2 million settlement amount from Sprint which relates to wholesale services provided prior to 2011. Clearwire's management believes it is useful to present pro forma revenue and pro forma net loss from continuing operations attributable to Clearwire Corporation in evaluating Clearwire's financial performance for the second quarter because they more accurately reflect the revenue-generating activity during the period.

Retail cost per gross addition (CPGA) was $313 in the second quarter 2011 compared to $443 in the second quarter 2010 and $295 in the first quarter 2011. Retail churn was 3.9% in the second quarter 2011, up from 3.2% in the second quarter 2010 and 3.3% in the first quarter 2011. Wholesale churn was 1.3% in the second quarter 2011, an improvement from second quarter 2010 wholesale churn of 3.0% and consistent with first quarter 2011 churn of 1.3%.

Pro forma adjusted EBITDA in the second quarter 2011 was a loss of $108.5 million, representing a sequential improvement of $85.7 million when compared to first quarter 2011 pro forma adjusted EBITDA loss of $194.2 million. In the second quarter 2011, actual adjusted EBITDA was a loss of $79.6 million, representing sequential improvement of $130.7 million when compared to first quarter 2011 actual adjusted EBITDA loss of $210.3 million.

The second quarter 2011 reported net loss from continuing operations attributable to Clearwire was $160.5 million, or $0.65 per basic share, and the second quarter 2011 pro forma net loss from continuing operations attributable to Clearwire was $167.0 million, or $0.68 per basic share. Including the effects of discontinued operations, the second quarter 2011 reported net loss attributable to Clearwire was $168.7 million, or $0.68 per basic share, and the second quarter 2011 pro forma net loss attributable to Clearwire was $175.3 million, or $0.71 per basic share. These figures include the impact of $590.9 million in non-cash write-downs as discussed in the Results of Continuing Operations section below.

At the end of the second quarter 2011, Clearwire operated networks in the U.S. covering areas where approximately 135 million people reside, including approximately 132 million people in 4G markets in the U.S. In the second quarter 2011, the company expanded its domestic 4G service areas to cover an additional 7 million people.

2011 Outlook

Clearwire now expects to end 2011 with approximately 10 million subscribers, with most of the new subscribers coming from its wholesale business. This is an increase from the previous guidance of 9.5 million subscribers provided in May 2011. Before any impact of an LTE deployment, the company expects capital expenditures in 2011 to be less than $400 million, and operations to generate positive adjusted EBITDA in early 2012 as a result of continued implementation of aggressive cost efficiencies aimed at improving cash flow.

Long Term Evolution (LTE) Network Technology Implementation

Following Clearwire's successful completion of 4G technology trials, which demonstrated the potential of Clearwire's unmatched spectrum advantage, including its ability to deliver download speeds exceeding 120 Mbps, the company announced today its intent to add "LTE Advanced-ready" technology to its 4G network. The deployment of LTE, which is subject to additional funding, would target densely populated urban areas of Clearwire's existing 4G markets where current 4G usage demands are high.

Clearwire's LTE implementation contemplates leveraging the company's robust all-IP infrastructure already deployed in these markets, which offers significant capital cost savings compared to a similar overlay by other carriers of an existing 3G architecture. The company also restated its commitment to its existing 4G WiMAX network, which covers approximately 132 million people while serving 7.65 million retail and wholesale customers and an ecosystem of nearly 110 WiMAX enabled devices, including all 4G phones currently offered by Sprint.

Results of Continuing Operations

Cost of goods and services and network costs (COGS) for the second quarter 2011 increased 80% to $433.4 million compared to $240.1 million for the first quarter 2011. COGS for the second quarter 2011 includes approximately $214.6 million of non-cash expense primarily related to the write-down of excess and obsolete network equipment, which was an increase from the approximately $6.5 million in non-cash write-downs incurred during the first quarter 2011. Excluding these write-downs, COGS decreased 6% from $233.7 million in first quarter 2011 to $ 218.8 million in second quarter 2011 due to lower network-related costs and 3G usage during the second quarter.

Selling, general and administrative (SG&A) expense for the second quarter 2011 decreased 17% to $178.2 million compared to $214.9 million for the first quarter 2011. The decrease is primarily attributable to decreased sales activity and greater focus on low-cost channels in the retail sales effort as well as reductions in the size of the company's workforce.

In addition to the $214.6 million of network equipment reserves and other write-downs included in COGS, total non-cash write-downs of $590.9 million in the second quarter 2011 includes $376.4 million loss from abandonment of network and other assets. Second quarter 2011 loss from abandonment of network and other assets includes $235.1 million in write-downs of uncompleted network development projects that were abandoned in the quarter as a result of management's decision to modify the company's future network deployment plans, including the company's intent to implement LTE in high usage areas of its existing network. Additionally, during the first and second quarter of 2011, the company terminated, or when early termination was not an available option, Clearwire advised its landlords of its intention not to renew, certain tower leases that were not needed for the company's network, resulting in a $79.3 million charge in the second quarter 2011 for the write-down of construction in progress projects related to these leases. In addition, during second quarter 2011, certain internally-developed software projects that had not yet been placed in service were abandoned, resulting in a charge of approximately $62.0 million.

Substantial completion of the first phase of the company's network build activities led to a decrease in capital expenditures (capex) to $56 million in the second quarter 2011 from capex of $618 million in the second quarter 2010. The company ended the second quarter 2011 with cash and investments of approximately $848 million invested primarily in U.S. Treasury securities. On July 29, 2011, Clearwire received a cash payment of $96.9 million for the second installment of the pre-payment and take-or-pay commitment for 2011 in accordance with the new Sprint wholesale agreements.

Clearwire Corporation
Summary of Financial Data From Continuing Operations
(In thousands)
(Unaudited)
Three months ended
Pro forma (1) Actual
June 30, March 31, June 30, March 31, December 31,
2011 2011 2011 2010 2011 2010
REVENUES  $ 293,713  $ 252,887  $ 322,611  $ 117,029  $ 236,808  $ 175,150
OPERATING EXPENSES:
Cost of goods and services and network costs (exclusive of items shown separately below)  433,363  240,145  433,363  269,565  240,145  271,652
Selling, general and administrative expense  178,232  214,864  178,232  207,499  214,864  223,894
Depreciation and amortization  169,640  182,474  169,640  82,026  182,474  175,161
Spectrum lease expense  76,620  74,821  76,620  68,152  74,821  72,389
Loss from abandonment of network and other assets  376,350  171,862  376,350  760  171,862  169,240
Total operating expenses  1,234,205  884,166  1,234,205  628,002  884,166  912,336
OPERATING LOSS  (940,492)  (631,279)  (911,594)  (510,973)  (647,358)  (737,186)
LESS NON-CASH ITEMS
Non-cash expenses  71,388  76,243  71,388  72,396  76,243  71,946
Non-cash write-downs  590,948  178,325  590,948  85,387  178,325  224,395
Depreciation and amortization  169,640  182,474  169,640  82,026  182,474  175,161
Total non-cash items  831,976  437,042  831,976  239,809  437,042  471,502
Adjusted EBITDA  (108,516)  (194,237)  (79,618)  (271,164)  (210,316)  (265,684)
Adjusted EBITDA margin -37% -77% -25% -232% -89% -152%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Total net subscriber additions 1,543k 1,761k 1,543k 723k 1,761k 1,540k
Wholesale 1,504k 1,610k 1,504k 595k 1,610k 1,417k
Retail 39k 151k 39k 128k 151k 123k
Total subscribers 7,648k 6,105k 7,648k 1,644k 6,105k 4,345k
Wholesale(2) 6,360k 4,856k 6,360k 752k 4,856k 3,246k
Retail 1,288k 1,249k 1,288k 892k 1,249k 1,099k
ARPU
Wholesale $6.18 $6.37 $7.92 $4.87 $5.04 $3.52
Retail $47.59 $46.80 $47.59 $42.17 $46.80 $45.52
Churn
Wholesale 1.3% 1.3% 1.3% 3.0% 1.3% 1.4%
Retail 3.9% 3.3% 3.9% 3.2% 3.3% 3.8%
Retail CPGA $313 $295 $313 $443 $295 $420
Capital expenditures  $56MM  $130MM  $56MM  $618MM  $130MM  $589MM
Domestic 4G covered POPS  132.4MM  125.6MM  132.4MM  55.7MM  125.6MM  112.0MM
Cash, cash equivalents and investments  $848MM  $1,245MM  $848MM  $2,268MM  $1,245MM  $1,748MM
(1) Pro Forma revenue includes the impact of approximately $16.1 million of wholesale revenue related to Q1 2011 that was recorded in Q2 2011 and approximately $12.8 million of wholesale revenue recorded in Q2 2011 to settle disputes related to prior usage.
(2) Includes non-launched markets.

Management Webcast

Clearwire executives will host a conference call and simultaneous webcast to discuss the company's second quarter 2011 financial results at 4:15 p.m. Eastern Time today. A live broadcast of the conference call will be available online on the company's investor relations website located at http://investors.clearwire.com.

Interested parties can access the conference call by dialing 1-877-392-9886, or from outside the United States by dialing 1-707-287-9329, five minutes prior to the start time. A replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on August 3, through Wednesday, August 17, by calling 1-855-859-2056, or from outside the United States by dialing 1-404-537-3406. The passcode for the replay is 82808568.

About Clearwire

Clearwire Corporation (NASDAQ:CLWR), through its operating subsidiaries, is a leading provider of mobile broadband services. Clearwire's 4G network currently provides coverage in areas of the U.S. where more than 130 million people live. Clearwire's open all-IP network, combined with significant spectrum holdings, provides an unprecedented combination of speed and mobility to deliver next generation broadband access. The company markets its 4G service through its own brand called CLEAR® as well as through its wholesale relationships with companies such as Sprint, Comcast, Time Warner Cable, Locus Telecommunications, Cbeyond, Mitel and Best Buy. Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks. Clearwire is headquartered in Kirkland, Wash. Additional information is available at http://www.clearwire.com.

Forward-Looking Statements

This release, and other written and oral statements made by Clearwire from time to time, contains forward-looking statements which are based on management's current expectations and beliefs, as well as on a number of assumptions concerning future events made with information that is currently available. Forward-looking statements may include, without limitation, management's expectations regarding future financial and operating performance and financial condition; proposed transactions; network development and market launch plans; strategic plans and objectives; industry conditions; the strength of the balance sheet; and liquidity and financing needs. The words "will," "would," "may," "should," "estimate," "project," "forecast," "intend," "expect," "believe," "target," "designed," "plan" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to put undue reliance on such forward- looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside of Clearwire's control, which could cause actual results to differ materially and adversely from such statements. Some factors that could cause actual results to differ are:

  • We have a history of operating losses and we expect to continue to realize significant net losses for the foreseeable future.
  • If our business fails to perform as we expect, we may require substantial additional capital, which may not be available onacceptable terms or at all, to be able to continue to operate.
  • Our current plans, and our expectations about becoming adjusted EBITDA and cash flow positive, are based on a number of assumptions about our future performance, which may prove to be inaccurate, such as our ability to substantially expand our wholesale business and implement various cost savings initiatives.
  • We expect that our business will become increasingly dependent on our wholesale partners, and Sprint in particular; if we do not receive the amount of revenues we expect from existing wholesale partners or if we are unable to enter into agreements with additional wholesale partners our business prospects, results of operations and financial condition could be adversely affected, or we could be required to revise our current business plans.
  • We regularly evaluate our plans, and we may elect to pursue new or alternative strategies which we believe would be beneficial to our business, including among other things, expanding our network coverage to new markets, augmenting our network coverage in existing markets, changing our sales and marketing strategy and or acquiring additional spectrum. Such modifications to our plans could significantly change our capital requirements.
  • We believe we need to deploy LTE on our wireless broadband network, alongside mobile WiMAX, to remain competitive; we will incur significant costs to deploy such technology, and will need to raise substantial additional capital to cover such costs. Additionally, LTE technology, or other alternative technologies that we may consider, may not perform as we expect on our network and deploying such technologies would result in additional risks to the company, including uncertainty regarding our ability to successfully add a new technology to our current network and to operate dual technology networks without disruptions to customer service.
  • We may experience difficulties in maintaining and upgrading ournetworks, which could adversely affect customer satisfaction, increase subscriberchurn and costs incurred, and decrease our revenues.
  • We currently depend on our commercial partners to develop and deliver the equipment for our legacy and mobile WiMAX networks.
  • Many of our competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services.
  • Our substantial indebtedness and restrictive debt covenants could limit our financing options and liquidity position and may limit our ability to grow our business.
  • Sprint owns just less than a majority of our shares, is our largest shareholder, and has the contractual ability to obtain enough shares to hold the majority voting interest in the company, and Sprint may have, or may develop in the future, interests that may diverge from other stockholders.
  • Future sales of large blocks of our common stock may adversely impact our stock price.

For a more detailed description of the factors that could cause such a difference, please refer to Clearwire's filings with the Securities and Exchange Commission, including the information under the heading "Risk Factors" in our Annual Report on Form 10-K filed on February 22, 2011 and subsequent 10-Q filings.  Clearwire assumes no obligation to update or supplement such forward-looking statements.

CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
June 30, December 31,
2011 2010
ASSETS
Current assets:
Cash and cash equivalents  $ 78,765  $ 1,230,242
Short-term investments  750,682  502,316
Restricted cash  1,000  1,000
Accounts receivable, net of allowance of $5,184 and $3,792  45,021  24,653
Inventory, net  10,402  17,432
Prepaids and other assets  85,450  82,580
Total current assets  971,320  1,858,223
Property, plant and equipment, net  3,516,710  4,447,374
Restricted cash  7,238  29,355
Long-term investments  18,521  15,251
Spectrum licenses, net  4,325,840  4,348,882
Other intangible assets, net  50,877  60,884
Investments in equity investees  13,273  14,263
Other assets  163,922  169,489
Assets of discontinued operations  44,298  96,765
Total assets  $ 9,111,999  $ 11,040,486
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses  $ 213,344  $ 448,789
Other current liabilities  224,003  226,997
Total current liabilities  437,347  675,786
Long-term debt, net  4,018,062  4,017,019
Deferred tax liabilities, net  17,885  838
Other long-term liabilities  523,052  444,774
Liabilities of discontinued operations  29,047  32,071
Total liabilities  5,025,393  5,170,488
Commitments and contingencies
Stockholders' equity:
Class A common stock, par value $0.0001, 1,500,000 shares authorized; 248,314 and 243,544 shares outstanding  25  24
Class B common stock, par value $0.0001, 1,000,000 shares authorized; 666,068 and 743,481 shares outstanding  66  74
Additional paid-in capital  2,244,048  2,221,110
Accumulated other comprehensive income  4,659  2,495
Accumulated deficit  (1,296,186)  (900,493)
Total Clearwire Corporation stockholders' equity  952,612  1,323,210
Non-controlling interests  3,133,994  4,546,788
Total stockholders' equity  4,086,606  5,869,998
Total liabilities and stockholders' equity  $ 9,111,999  $ 11,040,486
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
  Three Months Ended
  June 30,
  2011 2010
     
Revenues  $ 322,611  $ 117,029
Operating expenses:
Cost of goods and services and network costs (exclusive of items shown separately below)  433,363  269,565
Selling, general and administrative expense  178,232  207,499
Depreciation and amortization  169,640  82,026
Spectrum lease expense  76,620  68,152
Loss from abandonment of network and other assets  376,350  760
Total operating expenses  1,234,205  628,002
Operating loss  (911,594)  (510,973)
Other income (expense):
Interest income  689  1,509
Interest expense  (128,617)  (24,469)
Gain on derivative instruments  115,279  --
Other income (expense), net  1,937  (2,876)
Total other income (expense), net  (10,712)  (25,836)
Loss from continuing operations before income taxes  (922,306)  (536,809)
Income tax provision  (17,464)  (214)
Net loss from continuing operations  (939,770)  (537,023)
Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  779,245  413,389
Net loss from continuing operations attributable to Clearwire Corporation  (160,525)  (123,634)
Net loss from discontinued operations attributable to Clearwire Corporation  (8,213)  (2,282)
Net loss attributable to Clearwire Corporation  $ (168,738)  $ (125,916)
Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:
Basic  $ (0.65)  $ (0.60)
Diluted  $ (0.98)  $ (0.60)
Net loss attributable to Clearwire Corporation per Class A common share:
Basic  $ (0.68)  $ (0.61)
Diluted  $ (1.01)  $ (0.61)
Weighted average Class A common shares outstanding:
Basic  246,631  205,126
Diluted   1,067,592  205,126
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
2011 2010
Revenues  $ 559,419  $ 217,791
Operating expenses:
Cost of goods and services and network costs (exclusive of items shown separately below)  673,508  419,089
Selling, general and administrative expense  393,096  410,908
Depreciation and amortization  352,114  157,553
Spectrum lease expense  151,441  134,843
Loss from abandonment of network and other assets  548,212  1,371
Total operating expenses  2,118,371  1,123,764
Operating loss  (1,558,952)  (905,973)
Other income (expense):
Interest income  1,529  2,755
Interest expense  (248,537)  (58,306)
Gain on derivative instruments  88,498  --
Other income (expense), net  2,227  (1,649)
Total other income (expense), net  (156,283)  (57,200)
Loss from continuing operations before income taxes  (1,715,235)  (963,173)
Income tax provision  (17,695)  (792)
Net loss from continuing operations  (1,732,930)  (963,965)
Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  1,355,528  748,904
Net loss from continuing operations attributable to Clearwire Corporation  (377,402)  (215,061)
Net loss from discontinued operations attributable to Clearwire Corporation  (18,291)  (4,947)
Net loss attributable to Clearwire Corporation  $ (395,693)  $ (220,008)
Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:
Basic  $ (1.53)  $ (1.07)
Diluted  $ (1.79)  $ (1.07)
Net loss attributable to Clearwire Corporation per Class A common share:
Basic  $ (1.61)  $ (1.09)
Diluted  $ (1.87)  $ (1.09)
Weighted average Class A common shares outstanding:
Basic  245,516  201,883
Diluted   976,166  201,883
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Six Months Ended
  June 30
  2011 2010
     
Cash flows from operating activities:
Net loss from continuing operations  $ (1,732,930)  $ (963,965)
Net loss from discontinued operations  (73,607)  (22,578)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income taxes  17,047  356
Losses from equity investees, net  940  1,212
Non-cash gain on derivative instruments  (88,498)  --
Accretion of discount on debt  20,854  2,146
Depreciation and amortization  352,114  157,553
Amortization of spectrum leases  26,748  28,110
Non-cash rent expense  109,619  90,503
Share-based compensation  11,264  30,594
Loss from continuing operations on property, plant and equipment  769,273  91,827
Impairment of assets of discontinued operations  58,806  --
Changes in assets and liabilities:
Inventory  7,212  (3,942)
Accounts receivable  (16,033)  (5,975)
Prepaids and other assets  (3,708)  (65,876)
Prepaid spectrum licenses  (3,942)  (2,688)
Accounts payable and other liabilities  (22,642)  101,283
Changes in assets and liabilities of discontinued operations  197  5,579
Net cash used in operating activities  (567,286)  (555,861)
Cash flows from investing activities:
Payments to acquire property, plant and equipment  (335,212)  (1,362,662)
Payments for spectrum licenses and other intangible assets  (1,249)  (11,050)
Purchases of available-for-sale investments  (857,035)  (1,701,704)
Disposition of available-for-sale investments  607,222  1,881,800
Other investing  22,117  (29,749)
Investing activities of discontinued operations  (2,533)  2,848
Net cash used in investing activities  (566,690)  (1,220,517)
Cash flows from financing activities:
Principal payments on long-term debt  (17,439)  --
Debt financing fees  (1,148)  (21,472)
Equity investment by strategic investors  --  56,671
Proceeds from issuance of common stock  3,619  302,873
Net cash (used in) provided by financing activities  (14,968)  338,072
Effect of foreign currency exchange rates on cash and cash equivalents  (2,533)  (2,097)
Net decrease in cash and cash equivalents  (1,151,477)  (1,440,403)
Cash and cash equivalents:
Beginning of period  1,230,242  1,690,571
End of period  $ 78,765  $ 250,168
Supplemental cash flow disclosures:
Cash paid for interest including capitalized interest  $ 236,292  $ 168,219
Non-cash investing activities:
Fixed asset purchases in accounts payable and accrued expenses  $ 38,365  $ 164,638
Fixed asset purchases financed by long-term debt  $ 9,792  $ 43,620
Non-cash financing activities:
Vendor financing obligations  $ (1,897)  $ (32,962)
Capital lease obligations  $ (7,895)  $ (10,658)

Definitions of Terms and Reconciliations of Non-GAAP Financial Measures to Unaudited Condensed Consolidated Statements of Operations

The company utilizes certain non-GAAP financial measures which are widely used in the telecommunications industry and are not calculated based on accounting principles generally accepted in the United States of America (GAAP). Other companies may calculate these measures differently.

(1) Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as consolidated operating loss less depreciation and amortization expenses, non-cash expenses related to operating leases (towers, spectrum leases and buildings), stock-based compensation expense, loss from abandonment of network and other assets, charges for differences between recorded amounts and the results of physical counts, and charges for excessive and obsolete network equipment and CPE inventory. A reconciliation of operating loss to Adjusted EBITDA is as follows:

Three Months ended
(Unaudited)
Pro forma Actual
June 30, March 31, June 30, March 31, December 31,
2011 2011 2011 2010 2011 2010
(in thousands)  
Operating loss  $ (940,492)  $ (631,279)  $ (911,594)  $ (510,973)  $ (647,358)  $ (737,186)
Non-cash expenses:
Spectrum lease expense  28,519  34,748  28,519  19,204  34,748  32,156
Tower & building rents  37,965  35,135  37,965  42,298  35,135  32,625
Stock compensation  4,904  6,360  4,904  10,894  6,360  7,165
Non-cash expenses  71,388  76,243  71,388  72,396  76,243  71,946
Non-cash write-downs:
Loss from abandonment of network and other assets  376,350  171,862  376,350  760  171,862  169,240
Network equipment reserves and other write-downs  214,598  6,463  214,598  84,627  6,463  55,155
Non-cash write-downs  590,948  178,325  590,948  85,387  178,325  224,395
Depreciation and amortization  169,640  182,474  169,640  82,026  182,474  175,161
Adjusted EBITDA  $ (108,516)  $ (194,237)  $ (79,618)  $ (271,164)  $ (210,316)  $ (265,684)

In a capital-intensive industry, management believes Adjusted EBITDA to be a meaningful measure of the company's operating performance. The company provides this non-GAAP measure as a supplemental performance measure because management believes it facilitates comparisons of the company's operating performance from period to period and comparisons of the company's operating performance to that of other companies by backing out potential differences caused by non-cash expenses related to long-term leases, share-based compensation and non-cash write-downs. Because this non-GAAP measure facilitates internal comparisons of the company's historical operating performance, management also uses this non-GAAP measure for business planning purposes and in measuring the company's performance relative to that of its competitors. In addition, Clearwire believes that Adjusted EBITDA and similar measures are widely used by investors, financial analysts and credit rating agencies as a measure of the company's financial performance over time and to compare the company's financial performance with that of other companies in the industry.

(2) ARPU (Average Revenue Per User) is revenue, less acquired businesses revenue (revenue from entities that were acquired by Old Clearwire), the revenue generated from the sales of devices, and shipping revenue, divided by the average number of subscribers in the period divided by the number of months in the period. Wholesale ARPU is wholesale revenue divided by the average number of wholesale subscribers in the period divided by the number of months in the period. Retail ARPU is retail revenue less acquired businesses revenue (revenue from entities that were acquired by Old Clearwire), the revenue generated from the sales of devices, and shipping revenue; divided by the average number of retail subscribers in the period, divided by the number of months in the period.

Three months ended
(Unaudited)
Pro forma Actual
June 30, March 31, June 30, March 31, December 31,
2011 2011 2011 2010 2011 2010
(in thousands)
Total revenue  $ 293,713  $ 252,887  $ 322,611  $ 117,029  $ 236,808  $ 175,150
Acquired companies & other revenue  (9,509)  (10,830)  (9,509)  (7,465)  (10,830)  (7,350)
Total ARPU Revenue  284,204  242,057  313,102  109,564  225,978  167,800
Wholesale ARPU revenue  102,624  76,974  131,522  4,496  60,895  26,223
Retail ARPU revenue  181,580  165,083  181,580  105,068  165,083  141,577
Total ARPU revenue  284,204  242,057  313,102  109,564  225,978  167,800
Three months ended
(Unaudited)
Pro forma Actual
June 30, March 31, June 30, March 31, December 31,
2011 2011 2011 2010 2011 2010
(in thousands)
Wholesale ARPU revenue  102,624  76,974  131,522  4,496  60,895  26,223
Average wholesale customers  5,533  4,025  5,533  308  4,025  2,485
Months in period  3  3  3  3  3  3
Wholesale ARPU  $ 6.18  $ 6.37  $ 7.92  $ 4.87  $ 5.04  $ 3.52
Three months ended
(Unaudited)
Pro forma Actual
June 30, March 31, June 30, March 31, December 31,
2011 2011 2011 2010 2011 2010
(in thousands)
Retail ARPU revenue  181,580  165,083  181,580  105,068  165,083  141,577
Average retail customers  1,272  1,176  1,272  830  1,176  1,037
Months in period  3  3  3  3  3  3
Retail ARPU  $ 47.59  $ 46.80  $ 47.59  $ 42.17  $ 46.80  $ 45.52

Management uses ARPU to identify average revenue per customer, to track changes in average customer revenues over time, to help evaluate how changes in the business, including changes in the company's service offerings and fees, affect average revenue per customer, and to assist in forecasting future service revenue. In addition, ARPU provides management with a useful measure to compare the company's customer revenue to that of other wireless communications providers. The company believes investors use ARPU primarily as a tool to track changes in the company's average revenue per customer and to compare Clearwire's per customer service revenues to those of other wireless communications providers.

(3) Pro Forma Reconciliation

The unaudited pro forma condensed consolidated statements of operations that follow are presented for informational purposes only and should not be taken as representative of the future consolidated results of operations of the company. Management believes the unaudited pro forma condensed consolidated statements of operations are useful because they more accurately reflect the revenue-generating activities during the relevant periods and facilitate period to period comparisons of the company's operating performance.

The following unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2011 and June 30, 2011 were prepared using the unaudited condensed consolidated statement of operations of Clearwire for the three months ended March 31, 2011 and June 30, 2011. The unaudited pro forma condensed consolidated statement of operations should be read in conjunction with the separate historical financial statements and accompanying notes thereto.

The pricing provisions agreed to in the 4G Amendment and the other new Sprint wholesale agreements are applicable from and after January 1, 2011. However, in accordance with generally accepted accounting principles in the United States applicable to revenue recognition, Clearwire's first quarter results did not reflect additional revenues due to the company as a result of the amendments contained in the Sprint wholesale amendments which were signed on April 18, 2011. During the second quarter of 2011, Clearwire recognized revenue of approximately $16.1 million attributable to services provided in the first quarter of 2011.

On April 27, 2011 Clearwire received a cash payment of $181.5 million comprised of the initial installments of the take-or-pay commitment for 2011 and the agree-upon pre-payment, as well as a $28.2 million settlement amount in accordance with the Sprint wholesale amendments. In the second quarter of 2011, in addition to revenues earned during the second quarter, the company recorded the $16.1 million of revenue attributable to services provided in the first quarter, and $12.8 million of the $28.2 million of cash received related to services provided in periods prior to December 31, 2010.

Had the Sprint wholesale amendments been in effect as of March 31, 2011, and the portion of the settlement related to prior periods been recorded in the attributable service periods, Clearwire's pro forma revenues for the second quarter of 2011 would have decreased by $28.9 million and the pro forma net loss from continuing operations attributable to Clearwire Corporation would have increased by $6.5 million or $0.03 per basic share.

The following table reconciles as reported results to the pro forma results for the three months ended March 30, 2011 and June 30, 2011 (in thousands):

Three Months Ended June 30, 2011 Three Months Ended March 31, 2011
(Unaudited) (Unaudited)
Amounts as
reported
Adjustments (1) Pro forma
amounts
Amounts as
reported
Adjustments (1) Pro forma
amounts
Revenues:
Retail revenue  $ 190,583  $ --  $ 190,583  $ 175,242  $ --  $ 175,242
Wholesale revenue  131,522  (28,898)  102,624  60,895  16,079  76,974
Other revenue  506  506  671  671
Total revenues  322,611  (28,898)  293,713  236,808  16,079  252,887
Total expenses  (1,262,381)  (1,262,381)  (1,029,968)  (1,029,968)
Net loss from continuing operations  (939,770)  (28,898)  (968,668)  (793,160)  16,079  (777,081)
Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  779,245  22,382  801,627  576,283  (12,087)  564,196
Net loss from continuing operations attributable to Clearwire Corporation  (160,525)  (6,516)  (167,041)  (216,877)  3,992  (212,885)
Net loss from discontinued operations attributable to Clearwire Corporation  (8,213)  --  (8,213)  (10,078)  --  (10,078)
Net loss attributable to Clearwire Corporation  $ (168,738)  $ (6,516)  $ (175,254)  $ (226,955)  $ 3,992  $ (222,963)
Net loss from continuing operations attributable to Clearwire Corporation per Class A Common Share:
Basic  $ (0.65)  $ (0.68)  $ (0.89)  $ (0.87)
Diluted  $ (0.98)  $ (1.00)  $ (0.89)  $ (0.87)
Net loss attributable to Clearwire Corporation per Class A Common Share:
Basic  $ (0.68)  $ (0.71)  $ (0.93)  $ (0.91)
Diluted  $ (1.01)  $ (1.03)  $ (0.93)  $ (0.91)
Wholesale ARPU  $ 7.92  $ 6.18  $ 5.04  $ 6.37
(1) Pro Forma revenue includes the impact of approximately $16.1 million of wholesale revenue related to Q1 2011 that was recorded in Q2 2011 and approximately $12.8 million of wholesale revenue recorded in Q2 2011 to settle disputes related to prior usage.

(4) Churn, which measures customer turnover, is calculated as the number of subscribers that terminate service in a given month divided by the average number of subscribers in that month using the actual number of subscribers. Subscribers that discontinue service in the first 30 days of service for any reason, or in the first 90 days of service under certain circumstances, are deducted from the company's gross customer additions and therefore not included in any of the churn calculations. Wholesale churn is calculated as the number of wholesale subscribers that terminate service in a given month divided by the average number of wholesale subscribers in that month using the actual number of wholesale subscribers. Retail churn is calculated as the number of retail subscribers that terminate service in a given month divided by the average number of retail subscribers in that month using the actual number of retail subscribers. Management uses churn to measure retention of the company's subscribers, to measure changes in customer retention over time, and to help evaluate how changes in the business affect customer retention. The company believes investors use churn primarily as a tool to track changes in the company's customer retention. Other companies may calculate this measure differently.

(5) Retail CPGA (Cost per Gross Addition) is selling, general and administrative costs, less general and administrative costs and acquired businesses costs (costs from entities that were acquired by Old Clearwire) plus devices equipment subsidy, divided by gross retail customer additions in the period.

Three months ended
(Unaudited)
June 30, March 31, December 31,
2011 2010 2011 2010
(in thousands)  
Retail CPGA
Selling, general and administrative  $ 178,232  $ 207,499  $ 214,864  $ 223,894
G&A and other  (120,033)  (115,947)  (136,105)  (122,210)
Total selling expense  58,199  91,552  78,759  101,684
Total gross adds  186  207  267  242
Total retail CPGA  $ 313  $ 443  $ 295  $ 420

Management uses retail CPGA to measure the efficiency of the company's customer acquisition efforts, to track changes in Clearwire's average cost of acquiring new subscribers over time, and to help evaluate how changes in the company's sales and distribution strategies affect the cost-efficiency of the company's customer acquisition efforts. Clearwire believes investors use retail CPGA primarily as a tool to track changes in the company's average cost of acquiring new subscribers.

(6) Market EBITDA is the equivalent of Adjusted EBITDA (see definition (1) Adjusted EBITDA) at the market level. This calculation does not include an allocation of corporate general and administrative expenses or spectrum lease expense.

CONTACT: Investor Relations:
         Alice Ryder, 425-636-5828
         alice.ryder@clearwire.com

         Media Relations:
         Susan Johnston, 425-216-7913
         susan.johnston@clearwire.com

         JLM Partners for Clearwire:
         Mike DiGioia or Jeremy Pemble, 206-381-3600
         mike@jlmpartners.com or jeremy@jlmpartners.com

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