Fixed wireless service provider Starry told investors it has hired investment bank PJT Partners to advise the firm on a merger, sale or other “balance sheet solution.” Co-founder and CEO Chet Kanojia said Starry had $29.4 million in cash at the end of September, down from $99.7 million at the end of the second quarter.

Kanojia said potential buyers/investors have already expressed interest in Starry. He said some of the parties are financial players and others are strategic investors, meaning companies running businesses that could be synergistic with Starry’s.

Starry offers fixed wireless access service using mmWave spectrum, which can transmit large amounts of data for relatively short distances. Multi-tenant apartment buildings in urban areas are Starry’s sweet spot, and Kanojia said demand is strong. 

With more than 10,000 net new adds during Q3, Starry grew its customer base to 91,297, up 66% from Q3 2021. About 20% of the apartment units that could get Starry’s service are signed up, Kanojia said. Starry activated about 50,000 new apartment units this quarter for a total of roughly 450,000 activated units.

But ARPU is not growing as fast as the customer base, Kanojia said. He attributed this to “our liberal use of a 4-6 week promotional period” and added “There has been no change in rack rate pricing and demand for the service is strong.”

Q3 revenue was $8 million, up 36% from the year-ago quarter. But the cost of revenue grew 43% year-on-year, SG&A expenses ballooned by 120%, and R&D costs rose 35%, leaving Starry with a net loss of $60.3 million for the quarter.

Workforce reductions, change of focus

Last month, Starry implemented severe cost cutting measures to try to cut its losses. 

“Despite our continued performance the macro environment has presented challenges to our financing and pushed out the timeline, forcing us to take immediate steps to reign in cash burn through the cost cutting measure announced in October,” Kanojia told investors during the company’s Q3 call.

He said Starry has eliminated 50% of its workforce and has paused plans for an expansion into Las Vegas. In addition, he said the company made the “difficult decision” to withdraw from the FCC’s Rural Digital Opportunity Fund. 

“While the participation in this important program fit with out strategic vision in 2020, changing capital needs, a changing capital environment and our continued success in the urban multi-tenant market forced our decision to step back and focus our energies and capital on executing on our core business plan,” he said. The FCC awarded Starry $268.9 million to cover 108,506 locations in nine states. Kanojia said that by withdrawing, Starry freed up $17 million cash that had been restricted to cover its RDOF commitments. 

Kanojia told investors Starry’s financial problems can be traced back to its March 2022 initial public offering, which raised $155 million. “We raised less than half what we expected,” the CEO said. “We need more cash to break even.”

The executive said he believes potential investors can see the value in Starry. “The network is performing well and we are delivering on internet service at or above advertised speeds,” he reported. He added that companies evaluating an investment in Starry also understand that its “cost and time to construct the network are competitive advantages.”

Starry’s stock, which trades below $1.00 per share, doubled in price after the Q3 earnings call.

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