NextWave Seeks Court's OK To Auction Six Licenses

Telecom Policy Report, June 9, 2004

Bankrupt wireless carrier NextWave, the controversial company that managed to retain control of extremely valuable spectrum licenses without actually paying for them, is pressing the bankruptcy court overseeing its reorganization for permission to auction its rights to a personal communications services (PCS) license in the 10 MHz band located in part of New York City, as well PCS licenses in Denver, Portland, Ore., Sarasota, Fla., Tampa, Fla., and Tulsa, Okla..

If the court grants the request, the auction could take place as early as July 8. In the event someone objects to the requested auction plan, a hearing on the matter would occur June 16 before the bankruptcy court in White Plains, N.Y.

The U.S. Supreme Court on Jan. 27, 2003, ruled that NextWave could keep billions of dollars worth of wireless licenses despite its failure to meet payment obligations established by the FCC. As a result of that ruling, NextWave is free to develop the wireless licenses itself or sell them to the highest bidder.

When NextWave won the licenses in 1996, it agreed to pay the FCC $4.7 billion. The would-be PCS provider made a single payment of $500 million. When it was unable to make additional payments, NextWave filed for bankruptcy in 1998. The FCC then seized the licenses, and NextWave took the matter to court.

In early 2001, the FCC re-auctioned the seized NextWave spectrum to a number of different carriers, including AT&T Wireless, Verizon and Cingular, raising about $16 billion in the process. As it turned out, Verizon was the top bidder. It paid up to $9 billion. Last year, the FCC finally agreed to return the deposits to the bidders.

The licenses NextWave wants to auction right now, while valuable, are not necessarily critical to the company's strategic plans, NextWave Chairman and CEO Allen Salmasi said in a prepared statement Monday (June 7). "Our recently approved global resolution agreement with the FCC specifically contemplates that a few licenses, including four of the licenses being auctioned, would be sold by the end of this year," he said. "The auction advances that goal and lays the groundwork to file a plan of reorganization in July that will describe the operational plan for our remaining spectrum assets."

Assuming the auction goes forward, NextWave's 65 million points-of-presence (POPs) footprint would still be the sixth largest in the United States, even without the six PCS licenses the company wants to auction off. The company wants to keep its business concentrated primarily in the northeast. Its revised wireless footprint would include six of the top 10 U.S. markets -- New York, Boston, Philadelphia, Washington-Baltimore, Detroit, and Los Angeles.

Salmasi said the "super-regional footprint" NextWave wants to retain provides the company with an "attractive opportunity" to deploy a nextgeneration broadband wireless network that is capable of providing high-speed data and Voice-over-Internet Protocol (VoIP) services to a wide range of consumers and enterprise customers. "The results and valuable experience gained from the broadband wireless trials we've been conducting in Henderson, Nev., confirm the growing industry consensus that broadband wireless is ready to provide fixed and mobility markets with a solid value proposition," Salmasi said.

NextWave's reorganization plan purportedly will detail the company's decisions about various operational opportunities now being considered, including building out the company's markets and entering into joint ventures and similar collaborative deployments with other carriers and strategic partners, the carrier said in announcing its plans to auction off the six PCS licenses.

"We intend to move our plan forward expeditiously," Salmasi said. "We will be providing for other financing in support of the plan, since the closing of any sale resulting from the auction is likely to be delayed beyond confirmation, and in case a sale does not close. NextWave's plan is intended to pay all of its remaining creditors in full, mostly utilizing our existing cash reserve of over $450 million, and will allow the company to reorganize before year-end with a very strong balance sheet."

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