We build and operate next generation mobile broadband networks that provide high-speed residential and mobile Internet access services and residential voice services in communities throughout the country. Our 4G mobile broadband networks not only create a new communications channel into the home or office, but also provide a broadband connection anywhere within our coverage area.
As of December 31, 2009, we operated in 61 markets in the United States and Europe, covering an estimated 44.7 million people. We had approximately 642,000 retail and 46,000 wholesale subscribers as of December 31, 2009. As a result, we believe we are the largest operator of next generation wireless broadband networks in the world. Our networks in the United States operate in 57 markets covering an estimated 41.7 million people. Internationally, as of December 31, 2009, our networks covered an estimated 3.0 million people in Ghent and Brussels, Belgium, Dublin, Ireland and Seville, Spain. In January 2010, we launched 4G services in Malaga, Spain.
We are the first mobile broadband service provider to launch service in the United States based on the 802.16e standard, which we refer to as mobile WiMAX. The mobile WiMAX standard facilitates fourth generation wireless services, which are commonly referred to in the wireless industry as 4G mobile broadband services. In our 4G markets, we offer our services both on a retail basis and through our Wholesale Partners, including Sprint, Comcast, Time Warner Cable and Bright House. We operated 4G mobile broadband networks in 27 of our markets in the United States as of December 31, 2009, covering an estimated population of 34.5 million people, with approximately 392,000 retail subscribers and 46,000 wholesale subscribers in those markets. These markets include, among others, Atlanta, Baltimore, Charlotte, Chicago, Dallas, Honolulu, Las Vegas, Philadelphia, Portland, Oregon, San Antonio and Seattle.
As of December 31, 2009, our other 34 markets continued to operate with a legacy network technology based on a proprietary set of technical standards offered by a subsidiary of Motorola, Inc, which we refer to as Motorola. This pre-4G technology offers higher broadband speeds than those generally offered by traditional wireless carriers, but lacks the mobile functionality of our current 4G technology. In 2009, we converted 16 of our legacy markets in the United States to 4G mobile broadband under the CLEARtm brand, and we intend to upgrade the majority of our remaining legacy markets in the United States to 4G technology over the next year.
We are an early stage company, and as such we are investing heavily in building our network and acquiring other assets necessary to expand our business. We have a history of operating losses, and we expect to have significant losses in the future. As of December 31, 2009, our accumulated deficit was approximately $413.1 million and the total principal outstanding on our debt was approximately $2.71 billion.
Our primary focus is expanding the geographic coverage of our 4G mobile broadband networks in the United States to take advantage of our more than 44 billion MHz-POPs of spectrum in the 2.5 GHz band. We are currently engaged in the development and deployment of markets throughout the United States. For 2010, we have plans to develop and launch 4G mobile broadband networks in large metropolitan areas in the United States, including Boston, Houston, New York, San Francisco and Washington, D.C. We currently expect that the combination of our existing 4G markets, our new market deployments and existing market conversions will allow us to cover as many as 120 million people with our 4G mobile broadband networks by the end of 2010. However, our actual network coverage by the end of 2010 will largely be determined by our ability to successfully manage ongoing development activities, including the acquisition, zoning, permitting and construction of over 10,000 sites, and our performance in our launched markets.
We regularly evaluate our plans, and we may elect to pursue new or alternative strategies which we believe would be beneficial to our business. These may include among other things, modifying the pace at which we build our 4G mobile broadband networks, augmenting our network coverage in markets we launch, changing our sales and marketing strategy and/or acquiring additional spectrum. We also may elect to deploy alternative technologies to mobile WiMAX, if and when they become available, on our networks either together with, or in place of, mobile WiMAX if we determine it is necessary to cause the 4G mobile broadband services we offer to remain competitive or to expand the number and types of devices that may be used to access our services. Whether we pursue any such plans or strategies may depend on our performance in our launched markets and our access to any additional financing that may be required.
We intend to grow our business by pursuing the following strategies:
•Redefining the broadband user experience: We deliver a robust, rich and consistent communications experience to users of next generation devices capable of operating on our networks. We offer our consumer and business customers a fast and mobile broadband connection that enables enhanced access to information, applications and online entertainment, while also creating new ways for people to communicate with each other. Our 4G mobile broadband network is designed to ultimately serve our subscribers’ Internet and voice communications needs, while also providing subscribers with the flexibility to access our services anywhere and anytime in our coverage area. We believe that our 4G services offer faster speeds, greater bandwidth and lower latency than those currently available from 2G/3G wireless service providers.
•Broadly deploying our service and rapidly increasing our subscriber base: We intend to broadly deploy our 4G mobile broadband services in markets throughout the United States. We are targeting our 4G mobile broadband networks in the United States to cover as many as 120 million people by the end of 2010. Our actual network coverage by the end of 2010 will largely be determined by our ability to successfully manage ongoing development activities and our performance in our launched markets. We believe that this deployment will enable us to rapidly increase our subscriber base. Our network is positioned to target a range of subscribers, from individuals, households and businesses to market segments that depend on mobile communications. We will offer our services through multiple retail sales channels, including direct and indirect sales representatives, company-owned retail stores, independent dealers, Internet sales, telesales, national retail chains and manufacturers who embed our high speed internet access capabilities into consumer electronic devices. Our services are also expected to be offered by third parties under wholesale arrangements, including wholesale services through our Strategic Partners — Sprint, Comcast, Time Warner Cable, Bright House, Intel and Google who serve more than 100 million customers in their markets.
•Taking advantage of our leading spectrum position: We believe we hold more wireless spectrum in the United States than any other mobile carrier, with holdings at December 31, 2009 exceeding 44 billion MHz-POPs (defined as the product of the number of megahertz associated with a spectrum license multiplied by the estimated population of the license’s service area) of spectrum in the 2.5 GHz (2496-2690 MHz) band in our portfolio, including spectrum we own, lease or have pending agreements to acquire or lease. We hold approximately 150 MHz of spectrum on average in the largest 100 markets in the United States. In Europe, we hold approximately 8.3 billion MHz-POPs of spectrum as of December 31, 2009, predominantly in the 3.5 GHz band, with a varying amount of spectrum in each of our markets. We believe that consumers will continue to demand greater access to information, applications and online entertainment over the Internet, each of which will require service providers to be able to offer greater bandwidth access. With our growing 4G mobile broadband networks and leading spectrum position, we believe that we are uniquely positioned to satisfy this demand. We believe that our significant spectrum holdings, both in terms of spectrum depth and breadth, in the 2.5 GHz band will be optimal for delivering broadband access services, and we believe that our substantial spectrum depth should allow us to offer premium services and data intensive multimedia content.
•Leveraging key strategic relationships: We expect to benefit from our key strategic relationships with our Strategic Partners. Our Wholesale Partners have begun offering our services as part of their bundled branded offering, or have announced their intentions to offer these services. We have commercial agreements with Intel intended to facilitate embedding mobile WiMAX chipsets in PCs, mobile Internet devices, which we refer to as MIDs, and other devices. We also have agreements with Google to provide for search and advertising revenue sharing, as well as, to jointly develop open architecture devices, and to make desktop and mobile content and applications available on our 4G networks. Additionally, our agreements with Sprint allow us to provide our customers with dual mode devices that allow roaming between our 4G networks and Sprint’s nationwide 3G network, and enable us to leverage Sprint’s existing infrastructure for our build out and network deployment.
•Offering premium value-added services and content: We believe that our all – IP 4G mobile broadband network positions us to generate incremental revenues, leverage our cost structure and improve subscriber retention by offering a variety of premium services and content over our network. We intend initially to focus on voice services as a primary premium service. As of December 31, 2009, we offered VoIP telephony services on a fixed basis to our subscribers’ homes and offices in 56 of our 57 domestic markets. We believe that our planned 4G mobile broadband deployment will enable us to offer additional premium services and content over our network as manufacturers develop and sell subscriber devices that take advantage of the capabilities of 4G technology.
•Achieving efficient economics: We believe our economic model for deploying our network combines meaningful early coverage while optimizing the capital outlay required for us to build the network and obtain subscribers. Our deployment plan is based on replicable and scalable individual market builds, allowing us to repeat our build-out processes as we expand. Under our commercial agreements with Sprint, we expect to be able to leverage existing Sprint network infrastructure to both accelerate the build-out and reduce the costs of network deployment, including utilizing its towers, collocation facilities and fiber resources. We also expect to achieve lower subscriber acquisition costs due to manufacturers’ stated plans to embed 4G mobile broadband chipsets into handheld communications and consumer electronic devices. We believe third party development of consumer products with embedded 4G mobile broadband capabilities will eventually reduce subscriber acquisition costs by reducing equipment subsidy requirements and enhance our distribution efficiency by leveraging manufacturers’ device distribution networks and marketing spend.
As of December 31, 2009, we offered our services primarily in 57 markets throughout the United States and in 4 markets in Europe. Our services today consist primarily of providing wireless broadband connectivity, and, as of December 31, 2009, in 56 of our domestic markets, we also offered fixed VoIP telephony services. Our retail services are offered under our CLEAR brand in our 4G markets and under the Clearwire brand in our legacy markets, and we offer 4G mobile broadband services in each of our 4G markets through our Wholesale Partners. Domestic sales accounted for approximately 88% of our service revenue for the period ended December 31, 2009, while our international sales accounted for approximately 12% of service revenue over the same period.
While we serve a large variety of subscribers, we believe that the majority of our subscriber base can be divided into the following broad categories:
•subscribers who require a portable or mobile high-speed Internet connection;
•subscribers who value the flexibility of a portable or mobile wireless broadband service;
•subscribers who desire a simple way to obtain and use high-speed Internet access at a reasonable price; and
•subscribers who are dissatisfied fixed or mobile with other service offerings, often because of perceived or actual poor quality of service, slow speeds, price, the requirement to participate in undesired bundled offers, difficulty of installation or unsatisfactory customer service.
We offer our subscribers a number of Internet and voice services, including mobile access, as our primary service offerings. We also plan to eventually offer value-added services through partnerships with device manufacturers/developers, value-added application developers and content development companies. Unlike existing cellular networks, applications over our 4G mobile broadband network are Internet Protocol-based with open Application Programming Interfaces, which can be accessed on a variety of electronic devices. We believe this approach should encourage the continual creation of new applications and the services to support them.
As of December 31, 2009, we had approximately 3,280 employees in the United States and approximately 160 employees in our international operations.
Our employees enter into agreements containing confidentiality restrictions. We have never had a work stoppage and no employees are represented by a labor organization. We believe our employee relations are good.