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Clearwire cuts 15 per cent of staff

Praying for profits

Clearwire is laying off staff as it tries to eke out its funds until it starts making money.

Clearwire launched its New York service this week, apparently with the last of its reserves as the company is now pulling back on advertising and retail expansion, and will be laying off 15 per cent of it near-on 3,000 staff to save operational expenses.

That means no advertising in Denver or Miami, where the WiMAX-based network will go live before the end of the year, and no Clear-branded handset either. The company has signed up 2.84 million subscribers, and brought in $147m in revenue last quarter - so it's a shame it managed to spend more than $686m, and still lost almost $540m over the period.

This is what's prompting the belt tightening, which extends to halting all site development not already announced and dropping contractors too. The company will still be rolling out to San Francisco and Los Angeles this year, but other expansion is now on hold.

Even those cutbacks aren't enough to keep the company operational for the few years it need to build up customer numbers and get into profit, so more funding has to come from somewhere. Clearwire says it's talking to "a number of its major shareholders and other third parties about a number of options".

One of those options is obviously to sell off some of its spectrum, something its been rumoured to have been considering for a while. 40MHz of spectrum - about a third of Clearwire's holding in most regions - should raise something in the region of $5bn, enough to see it into profitability. But it's a buyers' market, and any spectrum sold will end up being used by a competitor so the decision us far from clear cut.

Clearwire backed the wrong horse with WiMAX, but was forced into the decision in order to get the first-mover advantage. It now needs to transition to LTE as that's become the standard 4G technology.

The company will struggle on for the next few years, including the LTE migration, but the question is if it can continue building customer numbers while the competition rolls out LTE networks too. Mobile networks are all about volume, and it will be 2013 before we can say for certain if that first-mover advantage really was worth paying for. ®

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