e425
Filed by Clearwire Corporation Pursuant to Rule 425
under the Securities Act of 1933 and
deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: New Clearwire Corporation
Commission File Number for the Related Registration
Statement on Form S-4: File No. 333-153128
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed transactions with Sprint Nextel Corporation, a Kansas
Corporation (Sprint), Intel Corporation, a Delaware corporation (Intel), Google Inc., a
Delaware corporation (Google), Comcast Corporation, a Pennsylvania corporation (Comcast), Time
Warner Cable Inc., a Delaware corporation (Time Warner Cable), and Bright House Networks, LLC, a
Delaware limited liability company (Bright House and, collectively with Intel, Google, Comcast,
Time Warner Cable and Bright House, the Investors.), Clearwire Corporation (Clearwire) filed a
proxy statement concerning the transactions with the U.S. Securities and Exchange Commission (the
SEC). STOCKHOLDERS OF CLEARWIRE ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE TRANSACTIONS.
Investors and security holders will be able to obtain free copies of the proxy statement and
other documents filed with the SEC by Clearwire through the web site maintained by the SEC at
www.sec.gov. Free copies of the proxy statement, when available, and Clearwires other filings
with the SEC also may be obtained from Clearwire, by directing a request to Investor Relations at
(425) 216-4735. In addition, investors and security holders may access copies of the documents
filed with the SEC by Clearwire on Clearwires website at
www.clearwire.com, when they become
available.
Clearwire, and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from Clearwires stockholders with respect to the transactions contemplated
by the definitive agreement between Sprint, the Investors and Clearwire. Information regarding
Clearwires directors and executive officers is contained in Clearwires Annual Report on Form 10-K
for the year ended December 31, 2007 and its definitive proxy statement filed with the SEC on April
29, 2008 for its 2008 Annual Meeting of Stockholders, which are filed with the SEC. You can obtain
free copies of these documents from Clearwire using the contact information set forth above.
Additional information regarding interests of such participants will be included in the proxy
statement that will be filed with the SEC and available free of charge as indicated above.
Forward-Looking Statements
This filing contains forward-looking statements that involve risks and uncertainties. The
forward-looking statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements may include statements
about future revenue, profits, cash flows and financial results, the market for Clearwires
services, future service offerings, change of control, industry trends, client and partner
relationships, Clearwires operational capabilities, future financial structure, uses of cash,
anticipated dilution or accretion of acquisitions or proposed transactions. Actual results may
differ materially from those stated in any forward-looking statements based on a number of factors,
including the ability of Clearwire to successfully integrate the businesses of Clearwire and its
acquisitions or partners; the effectiveness of Clearwires implementation of its business plan, the
markets acceptance of Clearwires new and existing products and services, risks associated with
management of growth, reliance on third parties to supply key components of Clearwires services,
attraction and retention of employees, variability of quarterly operating results, competitive
factors, other risks associated with acquisitions, changes in demand for Clearwires service or
product offerings, financial stability of Clearwires customers, the ability of Clearwire to meet
its contractual obligations to customers, including service level and disaster recovery
commitments, changes in government laws and regulations; risks associated with rapidly changing
technology; the risk that the transactions described above are not consummated; as well as the
other risks identified in Clearwires filings with the SEC, including, but not limited to, its
Annual Report on Form 10-K for the
year ended December 31, 2007 and Quarterly Reports on Form 10-Q, copies of which may be obtained by
contacting Clearwires Investor Relations department at (425) 216-4735 or at Clearwires web site
at www.clearwire.com. We undertake no duty to update any forward-looking statement to conform the
statement to actual results or changes in Clearwires expectations after the date of these filings.
###
On September 9, 2008, John Butler, the CFO of Clearwire Corporation, gave a presentation at
the Jefferies Communications Conference. A transcript of the presentation follows.
******************************************************
Clearwire Corporation at Jefferies & Co. Communications Conference
September 9, 2008
C: John Butler; Clearwire; CFO
P: Romeo Reyes; Jefferies & Co.; Analyst
******************************************************
John Butler: Okay. Good morning. My names John Butler, Im the CFO of Clearwire and we appreciate
you joining us this morning. So, weve got fairly short period of time here, so Im going to just
try to hit the high points so we have some time for questions and answer.
The new Clearwire has a there we go. The new Clearwire has a large and rapidly growing target
market opportunity. We find ourselves at the crossroads of the next huge advancements in wireless
and that is not by accident. In our pending transaction with Sprints 4G operations were
assembling optimal 4G spectrum, next generation technology that is here and ready today, robust
device ecosystem, premier distribution partners with a tremendous base of embedded customers and
access to existing infrastructure, all at superior economics.
We believe we have all the key ingredients to generate superior short and long term shareholder
value by offering consumers and business customers alike all the wireless services they want at
speeds, capacities and capabilities not seen before over a single low cost network.
To appreciate where the new Clearwire takes us, we begin with where weve come from and the many
lessons learned from our existing pre-WiMAX platform over the past three years. Over the past three
years, weve built a company that operates in 50 markets with close to 0.5 million customers and
have learned an awful lot about developing markets cost effectively, understanding customer
behavior and need gaps, and building a scaleable, replicable business with great economics.
Our first 25 markets are approaching 80% gross margins and 35% market EBITDA margins and our
spectrum portfolio has grown significantly. As we prepare to move to WiMAX, were making a
conscious effort to focus our available resources on WiMAX deployments while driving profitability
in our existing markets.
Consistent with our previous practice of what we often described as creep before you leap, we have
our first four WiMAX markets well into development including Portland, Oregon, Atlanta, Las Vegas,
and Grand Rapids, Michigan. Given the results of our network infrastructure testing, antennae
testing and device testing in Portland and early results in Atlanta, were very pleased with what
were seeing which is exceeding expectations.
As a consequence, we are planning to accelerate the upgrade of our existing markets in 2009 rather
than 2010. And on an overall basis, we have a portfolio with nearly 10,000 sites either on air or
in development. That puts us well on the way in terms of our long term goals. And as always, we
modulate the pacing of bringing sites on air with the financing available.
So, theres lots of noise about LTE and WiMAX and lots of people trying to make this like a Betamax
or VHS war, or in more recent times, Blu-ray versus High-Def DVD formats. What people are failing
to realize is that roughly 85% of the DNA between LTE and WiMAX is the same. Both use the OFDM
waveform and are very similar in many respects other than the uplink. This is not really a
technology war. The elephant in the room isnt the format, its the spectrum depth.
Now Clearwire, new Clearwire will have about 42 billion megahertz pops and that translates roughly
120 megahertz per market. And while our larger competitors have substantial footprints in their own
rights, without re-farming spectrum in their existing footprints in addition to 700, dedicating
enough spectrum today is going to be very difficult for them to offer the same kinds of services
that Clearwire is capable of offering with its footprint.
So, we
think of it in terms of a fire hose versus a garden hose. Let me tell you a little bit more
about what I mean by that. In our early launches, we launched markets with about 30 megahertz of
spectrum. And in the chart on the left, you can see the kinds of services you can typically offer
we believe with WiMAX or LTE with 30 megahertz of bandwidth. With our average of 120 megahertz of
bandwidth, you can see why our cable partners are so excited. This enables the whole home and away
experience. It enables the new Clearwire to provide very bandwidth very high bandwidth intensive
applications over the air at very high speeds and will revolutionize the wireless world as we know
it.
Now, lets talk for a moment about devices. The key take-aways on this slide is that the laptop PC
universe, the handset universe, and the mobile Internet device universe as well as the silicon
universe are all rapidly advancing on WiMAX deployments. What were doing has great appeal to the
consumer electronics device manufacturers and the way were doing the uplink without the
heavily-laden IPR expenses of a CDMA uplink, like LTE and other technologies, makes the chipsets
cheap, like WiFi cheap. That gets OEMs excited about embedding the chipsets that we need in
devices and really positions us well for the future.
This slide focuses on the consumer pocketbook, the services consumers are subscribing to and what
theyre paying for these services, often up to $250. Today Clearwires built a business largely on
a residential broadband business, that top line (referencing top line of slide). Thats our cable
DSL replacement business and its been a great business for us.
If you look at the markets, were generating close to, and in some cases above, 80% gross margins.
And thats with our most bandwidth intensive application and our lowest revenue-yielding
applications. So, as we expand into the new segments of the wireless universe, our cost per
delivered bit is the same, but our revenue yield grows substantially.
So, if were able to do 80% gross margins in the most bandwidth intensive segment, think about what
that does to our model. Given our experience with McCaw, Nextel, Nextel Partners, Western Wireless
and elsewhere in our management team, if were even modestly successful at the mobile WiMAX, at the
mobile voice business, with 25 times the yield on the revenue side, it represents a tremendous
opportunity for the new Clearwire.
So, lets try to make it tangible for you. So, if you look at a single market today were going
to walk through a single market, were going to walk through our first 25 markets and then were
going to walk through how you extrapolate that to the larger business plan.
So, heres the typical market weve shown you in the past. It encompasses about 160,000 households
and about 390,000 covered POPs. Its been operating for about 2.5 years and we have 16% household
penetration or about 24,000 subs in this market. Its generating close to $40 in ARPU with a CPGA
of about $275. This markets already generating 84% gross margins and 45% market EBITDA margins as
of the second quarter of 08. This is before WiMAX, before the additional products, before the
higher speeds, before the greater capacities. This is a great business even with what we have
today.
Okay. You might think that I cherry-picked that last market, fair enough. So, lets look at the
first 25 markets. And what do we see? 13% penetration of households, $39 ARPU, 2.3% churn and CPGA
of about $325 last quarter. That combination of metrics led to 77% gross margins and 34% market
EBITDA margins. All 25 of the markets, individually and as a group, are market EBITDA positive.
So, a lot of naysayers say well, those Clearwire guys are good at small markets, right? But they
cant do big markets. Wrong. If you look at Honolulu, our first large market, up for 21 months,
its on a similar trajectory to our other markets and from a metrics perspective and is already
EBITDA positive. If you look at Seattle, its right on the heels of Honolulu and a very similar
trajectory from both a market metrics and market EBITDA positive position which we expect to reach
very soon. Again, all pre-WiMAX, largely generated on the back of the single cable modem DSL
replacement business.
But the good news is that our VoIP business has rapidly gained traction and is line with our
expectations, our new PC Express card which we introduced in July is also rapidly gaining traction.
All these services are leading to additional revenue opportunities. All pre-WiMAX, all before again
the faster speeds, higher capacity, and all the things that WiMAX has to offer. So, were very
excited about our future.
Now, lets move into the larger model. So, youve seen the single market, the first 25, how does it
look when you roll up the business plan because all were doing is more of the same, layering on
more markets, layering on more products and adding wholesale partners. So, depending on the time of
closing the Sprint transaction and any interim financing that we choose to do, we expect to cover
60 million to 80 million POPs in 2009 and 120 million POPs in 2010. This covers the bulk of the top
100 markets.
Ultimately, we get to about 200 million covered POPs requiring 35,000 cell sites. From a subscriber
count perspective, we get to about 20 million subscribers around 2014 and 30 million in 2017. We
expect our retail subscribers to take just north of 1.5 services or revenue-generating units by
2014 or so, out of these multiple products well be offering.
So, if you assume we cover these 200 million people and you assume we get 11% to 12% penetration of
covered POPs by say 2015, and 14% to 15% by 2017 which we think is in line with our current
trajectories as well as those of other recent entrants like Leap and Metro and others, if you
assume $60 to $65 per account in ARPU. And that sounds like a lot and it sounds like a big increase
but its really not. Weve modeled in 3% to 5% declines in ARPU every year in every product. We
havent seen any of that to date. If you look at our ARPU its risen every year, but weve modeled
that in.
The assumption here is that we get our customers to take multiple services. Thats why ARPU rises.
And were already seeing it with both the VoIP take rates and the PC card take rates that were
enjoying in the markets. If you roll all that up, you end up with a business that has $13 billion
to $17 billion in revenue, 39% to 45% EBITDA margins, and based on the kinds of gross margins were
already generating of 75% to 80%, we think thats eminently doable with modest management of SG&A,
get to an EBITDA number of $5 billion to $7.5 billion and free cash flow of $2.5 billion to $3.8
billion.
We get a lot of questions about where we are with the pending Sprint deal. So, lets talk about the
key components of that. There was no second request from the DOJ, so were proceeding to closing on
that front. Were very pleased with the responses to our FCC filings and but for one major carrier
whose transparent efforts to throw tacks in the road dont seem to be garnering a lot of support
really anywhere or at the agencies. So, were making progress with the FCC as well and hope to be
on their docket shortly.
Weve made our initial S-4 filing and expect to receive SEC comments shortly, which well respond
to as expeditiously as possible. So, we believe that everything is still on track for fourth
quarter closing and seems to be moving right along with no issues so far.
So when you boil it all down, we think were bringing all the pieces together to make this a
tremendous business opportunity both long-term and short-term. And again, were assembling the
right spectrum, the right partners, the right device ecosystem, partners who have an immense
embedded base of customers, and weve got access to the infrastructure of our partners, and
superior economics. All of these things blended together we think yields a tremendous business and
were very excited about our prospects.
And with that, we can open it up to questions. Yes?
Romeo Reyes: John, thanks for being here. Couple questions regarding the WiMAX overlay. When you go
to a 16E, I dont know if you have any revised or updated numbers as to what that cost is going to
be per covered POP?
And then, similar to Leap and Metro, theyve done a good job of outlining how long it takes to go
break-even, what penetration rates, and its get to EBITDA positive, free cash flow? Do you have
any metrics that you can beyond your existing 25 markets, once you overlay WiMAX, what type of
penetration rates you need, how long it takes to go break even in some of these WiMAX markets?
Thanks.
John Butler: Sure. So, from a as you aptly mentioned, Romeo, weve got with the conversion of
the existing markets, well have enough spectrum to do an overlay and minimize any customer
disruptions for existing customers
today. That involves in some cases, the antennae arrays were already updated for WiMAX, so those
were done in the last year or so. In some cases, the antennae arrays need to be updated. The radios
have to be changed out. In an overlay case, were actually just going to put the new WiMAX radios
alongside.
So, everything else stays the same, backhaul, huge capacity there, the core network doesnt change,
the cabinet at the base doesnt change. So, the cost of adding that overlay to an existing tower
site, we havent gotten too specific with, but its a pretty modest cost per tower site and its
been fully baked into the business plan and that really hasnt changed.
With respect to EBITDA, if you looked at our existing markets, I would say that most of those have
gotten to EBITDA positive in the kind of 8% to 10% penetration of households kind of time frame.
And it varies a bit based on the pacing of those markets and how fast theyre rolling up customers.
The faster you add customers, it often actually slows the EBITDA positive because of that cost per
gross add.
Now basically, post WiMAX, all things get better because weve got higher yielding products with
great gross margins, not that our 75% to 80% gross margins today are anything to sneeze about, but
it just improves the circumstances that we have already today as a lot of that ARPU falls straight
to the bottom line.
What you have to remember is were really running a bit factory. And were relatively indifferent
from a cost perspective, so a bit whether its voice, video or data costs us the same amount to run
over the factory. Its just the revenue yield gets a lot higher and the products and services were
delivering today have kind of the highest customer usage bandwidth requirements. And the ones were
going in to have much lower bandwidth requirements.
So, all those things point to those break even points going sooner rather than later. We just
havent gotten specific yet about that. We would expect to once the transactions complete and
were fully aligned with our partners because theres still, while were in general alignment,
theres still some differences between the plans and we want to get all that nailed down before we
go public with that.
Audience Member: Yes, I think the elephant in the room with your stock is that fact that you have
the cable companies and effectively Intel and Google paying $17 a share in cash to be a partner in
this business and were effectively be having opportunity to buy the stock at $9. I guess my
question to you is looking at broader markets right now, you need $1.6 billion in capital. Thats
down from $2.2 billion to $2.3 billion, I believe.
Can you walk us through why was there a capital reduction in terms of amount of capital needed? And
for that matter, is there an alternative source beyond the capital markets to get money at more
attractive prices? Because obviously, the market present wont value you there, someone may
otherwise.
John Butler: Sure, okay. So, Im not sure exactly where the $1.6 billion came from, but lets frame
things. To date we ended the quarter with about $528 million in cash, well get $3.2 billion as
you aptly pointed out between the collar of $17 and $23 a share. The funding gap as we currently
see it $2 billion to $2.3 billion, so weve not seen any reduction in that funding gap. That may
have been reported somewhere erroneously. But our belief, based on the roll out schedule that we
have, is that that funding gap would be $2 billion to $2.3 billion based on the roll out schedule
that we have today.
Now, weve got a variety of different opportunities, right? So first of all, that combination of
cash will last quite some time, well in to late 2010 at this roll out schedule. If the capital
markets arent improving by 2010, we would certainly modulate our build up or down and folks whove
been with us for a long time have seen us do that actually several times in our history.
When the capital markets are good, well take advantage of that and opportunistically draw on the
capital markets, if theyre not so good, we slow things down a bit and sell funds more and slow
down our pacing. And that would be the same thing here. So, if the capital markets remained very
poor for an extended period of time, wed look at the pacing of the market roll out schedule.
Audience Member: You dont have plans to effectively go for capital this year at all, thats what
youre suggesting? If
John Butler: This year?
Audience Member: Because that was the concern obviously among all investors, I think, is that
theres a big capital coming in and the question is how to raise it in this present capital market.
John Butler: Sure. With $3.2 billion billion coming in estimated fourth quarter, our expectation is
that we dont need to draw on the capital markets with any sense of urgency and we can be fairly
opportunistic about when we do that to the extent that the capital markets are favorable. And weve
received indications that with the tripling in spectrum that we have and the defragmenting of that
spectrum by consolidating it with the Sprint owned spectrum, weve unlocked potentially more the
potential of the spectrum band, if you will.
That and $3.2 billion underneath the Company, underpinning the Companys equity, we believe makes
us more attractive in the debt markets than ever, but well have to see how the debt markets fare
over coming months and into next year. But we wont rush to cover that gap if the debt markets
arent reasonably supportive of that effort. Well wait a while.
Romeo Reyes: All right. John, just a quick follow-up on financing. Where do you stand on rolling
the $1.25 billion of term loans that you have outstanding? I guess that change of control was
triggered by the Sprint transaction. And does that late 2010 liquidity runway that you just
mentioned include rolling that debt before the transaction with Sprint closes?
John Butler: It does assume rolling that debt, Romeo. I think the thought would be when capital
markets are advantageous wed be likely to refinance that debt at some point in time and layer in
additional debt with it, either high yield or increase the size of the senior facility when it
makes sense. The negotiations with our lenders are ongoing and impediments to the transaction
closing continue to fall away, those discussions are going reasonably well.
Any more questions?
Romeo Reyes: From the cable partners, are there contractual obligations for subscribers that
theyre going to have minimum requirements over time as they ramp up?
John Butler: Sure. There are no contractual requirements for the cable folks, but I will tell you
we are seeing a very enthusiastic response from all of our cable partners, especially Comcast and
Time Warner. The text of the conversations tends to flow a lot more around how quickly can we get
our front ends connected so we can get in to the selling process more quickly.
So, theyve been very supportive of what weve been doing and I think if you saw Brian Roberts, for
example, when we did the test in Portland with him and he downloaded real-time in a vehicle moving
at a rapid pace off a DVR in Seattle programming and saw it in High-Def real-time in a moving
vehicle, it kind of showed the future.
And thats the kinds of services that just heretofore havent been able to be provided. And what
really gets these cable guys excited from our perspective is this home and away opportunity. They
can deliver a lot of the same things that theyre delivering today into the home, into the palm of
your hand, they think thats very valuable. And we do as well.
And with that, we appreciate your time this morning. Thank you.