Clearwire (CLWR): Sell, Coverage Strategy Weak, Needs More Money

Citi reiterated its SELL for wireless broadband company Clearwire (CLWR) and held its target price at $13. Citi hates CLWR’s coverage strategy, the competitive landscape, and the company’s funding requirements.

Unsustainable coverage strategy:

We believe CLWR’s business plan will need to build substantially over 140 mil. POPs [points of presence] over time, thereby raising its funding requirements. We believe alternative dual-mode WiMAX/CDMA products to address the coverage gaps will be more expensive from a device and roaming perspective, while we believe device availability may be limited for some time.

Expect greater mobile broadband competition:

We believe both T and VZ are better positioned to compete with a cleaner, more effective mobile broadband product strategy with reliable national coverage networks, solid 3G speeds, wider device variety and the potential for 4G deployments to accelerate into the 2010 timeframe, whereas we do not view CLWR’s potential Internet speed advantage over the next 2-3 yrs as a compelling point of differentiation.

Expect higher funding requirements:

We believe CLWR will incur higher funding requirements, as long term coverage is likely to extend well beyond the 2010 goal and forecast peak incremental funding needs of $6.5 bil. by 2014, including potential debt refinancing of $1.35 bil.

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