Funding hiccups slow Unwired WiMAX rollout

Telecom Asia, Feb, 2007 by Lachlan Colquhoun

Australian wifeless broadband pioneer Unwired, in which Intel holds a 25% stake, is having problems raising capital as it waits to build the country's first WiMAX network.

In January Unwired confirmed that it had missed a deadline to bank A$5 million ($3.9 million) from Mitsui, earmarked for the WiMAX network, because it had failed to meet a condition to raise an extra A$10 million.

Unwired has raised only $5.4 million through the sale of its network towers on a lease-back contract. Mitsui has now agreed to extend the funding deadline for the A$5 million injection, and another A$8 million it has also promised, until June 30.

The two companies will, however, continue with a venture offering WiMAX expertise to other networks being constructed globally.

Unwired, which currently offers wireless broadband in Melbourne and Sydney using proprietary software developed by Navini, plans to roll out the WiMAX network in Brisbane, Adelaide and Perth and then upgrade its Sydney and Melbourne networks--in which it has invested more than A$30 million--to the new standard.

Floated in a A$105 million IPO in December 2003, Unwired has been the center of interest as a potential competitor to the dominant broadband players Telstra and Optus. Despite its potential, Unwired has continued to bleed red ink, as evidenced by results from the last quarter of 2006 showing a negative operating cash flow of A$600,000.

It also cut capital expenditure significantly in that quarter, down from A$2.7 million to A$900,000. Financial analysts are not expecting the company to break even until 2008, but most predict a bright future when WiMAX technology matures, saying Unwired's services should be cheaper and faster than Telstra's current ADSL product.

Unwired is blaming the delayed availability of WiMAX devices for its funding hiccups, and says that as soon as that situation is redressed it will raise the capital it needs. "The type of service we want to provide is only possible later in 2007, so that has slipped a bit" said Unwired chief executive David Spence.

"We have always said we will raise money at the right time and not before"

Referring to the company's pioneering role in Australian WiMAX, Spence said: "It's a bit like cycling--it's a bit windy out front"

Intel invested A$37 million in Unwired in early October as part of a technology development partnership, but the deal was structured around convertible notes which mean that Unwired pays interest to the US chipmaker.