WASHINGTON-North Coast Mobile Communications-gone. GO Telecommunications Corp.-gone. PCS 2000-director and CEO Anthony Easton resigns to “pursue other business interests.” NextWave Personal Communications, GWI PCS Inc., DCR PCS Inc.-cleaning up. April Fools? Not hardly. Just another week in the life of the C-block broadband personal communications services auction.
From the look of things, NextWave does have a stranglehold on the New York City market, with only one or two remaining bidders big enough to issue any kind of challenge. As of Round 64, NextWave had committed $994.1 million for New York and another $663 million for Los Angeles. It also held high bids on 36 other markets-including Washington, D.C.; Boston; Houston; Baltimore; Kansas City, Mo.; and Cleveland/Akron, Ohio-and it would like to take Atlanta away from GWI.
Another mover last week was DCR PCS Inc., which laid tentative claim to 41 markets, including Chicago, Detroit, Dallas-Fort Worth, St. Louis, New Orleans, Las Vegas and Honolulu. DCR appears to be building clusters in Illinois, Missouri, Arkansas, Indiana, Louisiana and Michigan.
Other bidders forming regional groupings include Poca Lambro PCS Inc. (eight markets in Texas and two in New Mexico), Roberts-Roberts & Associates LLC (eight properties in Missouri), SouthEast Telephone LP Ltd. (six Kentucky markets), SOWEGA Wireless Communications LP (two markets in Georgia), Windkeeper Communications Inc. (three properties in North Carolina) and Wireless 2000 Inc. (10 Wisconsin markets).
The real-estate credo of “location, location, location” has made its way into the PCS industry with the added phrase “at a price.” The sky-high bids being made for Top 10 markets took even the most aggressive players out of the game, and at least one of them promises court action after the auctions end.
“I get the feeling that the big are just getting bigger,” said Jon Foxman of BIA Consulting Inc. “There appears to be an upward spiral and a downward spiral.”
According to Foxman, the Top 10 highest dollar-value markets are New York City; Los Angeles; Chicago; San Francisco/Oakland/San Jose, Calif.; Philadelphia, Pa./Wilmington, Del./Trenton, N.J.; Dallas-Fort Worth; Boston; Washington, D.C.; Miami-Fort Lauderdale, Fla.; and Houston. Surprisingly, none of these markets placed in the Top 10 most active entities last week, and none have placed in the Top 10 most active markets overall.
Rumors of GO’s impending demise made the rounds at last week’s Cellular Telecommunications Industry Association confab in Dallas, but the bidder wasn’t dead yet, although apparently it wanted to be. “I hope someone outbids us for the Florida markets,” said GO head Steve Zecola. “Until that happens, we must stay in.” Zecola’s wish was granted in Round 65, when DCR took over the high bids on West Palm Beach/Boca Raton, Fort Myers and Fort Pierce/Vero Beach/Stuart. New rival GWI holds the high bid on Miami-Fort Lauderdale but it has made no move to consolidate the state. Go zeroed out its eligibility early Friday morning.
Zecola made no bones about his plans for GO’s future. “We will go into litigation, and it’s going to be ugly,” he said. One target will be NextWave and its foreign partners, a cause Zecola has pursued in a letter-writing campaign to the Federal Communications Commission.
As for North Coast, excessive prices for both New York City and Philadelphia finally took their toll along with the possibility of a challenge to any license once the auction ends. In a written statement, North Coast’s John Dolan said, “After consultation with [uncle] Charles Dolan and other potential financing sources, we have concluded that the bidding had reached a level of speculative excess which we could not economically justify*…*NCMC remains interested in PCS as a business and will continue to monitor developments and potential opportunities in this area.”
“This whole thing is a big mess,” commented analyst Taylor Simmons of Simmons Associates, who has been covering the auction. “Can any good possibly come out of all of this, except for more PR for Reed Hundt? I see a `lose-lose’ situation here-the winners will be in debt and the losers will badger the winners with lawsuits.”
Federal Communications Chairman Reed Hundt has made it very clear that the FCC means business. Also at CTIA, Hundt said the FCC will “go after” any PCS C-block bidders that walk away from high bids because of inability to pay final auction prices. He said the FCC plan involves reauctioning any licenses on which a high bidder defaults, and seeking from the defaulted bidder the difference between the lower final sale price and the original bid.
Simmons wondered if all these problems could have been avoided if the FCC would have auctioned the C-block and the F-block markets simultaneously. “Logistically, it would have been a nightmare, but the A- and B-blocks were relatively simple and efficient, due in part to having two licenses for each market,” he explained. “Between the government financing extending people’s pocketbooks and the fact that there would be only one winner for each market, this auction created a danger level of competition that may ruin any chance for entrepreneurial success.”