Clearnet posts huge fourth-quarter loss on increased spending
February 20, 1998
PICKERING, Ont. (CP) D Clearnet Communications Inc. lost $289 million in 1997, four times more than the previous year, as it spent heavily to expand and market its wireless telephone network.
Despite the huge loss, Clearnet's chief financial oficer Robert McFarlane dismissed the red ink Friday as an expected cost of doing business as the company sells its PCS or personal communications services, the digital next generation of cellular phones.
Clearnet is one of four Canadian companies to compete in the PCS market, which offers digital phone quality, better security, longer battery life and more bells and whistles than standard cellular.
The other companies are Microcell Communications of Montreal, the Stentor companies' Mobility groups and Rogers Cantel Mobile Communications.
Clearnet's $289.8 million annual loss was nearly four times the $74.8 million it lost in 1996. The company said it spent nearly $562 million in capital spending last year, compared with $124.6 million in 1996.
"Clearnet's financial results are consistent with the business model for an early stage wireless operator and reflect the significant subscriber growth achieved in the fourth quarter," McFarlane said in a release.
"Significant losses are the norm in the early years until we build up a large subscriber base so that the recurring monthly revenues exceed the cost of subscriber growth."
The large loss underscores the investments Clearnet needs to make to establish a foothold in Canada's fast-growing wireless industry. Quickly building a network and attracting customers will increase cash flow but it also raises the costs of advertising, commissions, handset subsidies and other expeses.
"Ironically, in the short term, the faster we grow, the greater our short term loss as well as the base for potential higher future positive cash flows," McFarlane said.
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