WASHINGTON-Noting the financial community has turned its back for the most part on entrepreneurs seeking funds to build their wireless networks, MCI Telecommunications Corp. has floated new license payment terms at the Federal Communications Commission in hopes the agency will restructure debt repayment.
The proposal is specifically designed to aid C-block personal communications services licensees. The action is one of several recently that address the problems C-block players are experiencing in the financial arena coupled with the FCC’s plans of how auction debt will be handled and by whom.
MCI met with FCC staff April 24 on this topic, at which time the commission asked for a developed proposal. In an ex parte letter sent to the commission May 1, MCI proposed changes in three areas: financing terms, ownership and attribution, and procedure.
“The entrepreneurs can be a strong and vital competitive force in the emerging wireless market if they can begin operations and develop a cash-producing business,” MCI wrote. “This is nearly impossible if they must spend most of the money they raise in debt service and license payments, instead of building revenue-producing networks with competitive footprints and aggressive marketing.”
MCI added that it and other carriers, vendors and investors were waiting to see if the FCC would take any measures to alleviate steep payments before they decide to finance or equip any of these new entrants.
MCI was careful to state that it was not speaking on behalf of any individual company, and that any facts and figures it presented to the commission were obtained from public sources.
“We think it’s a good proposal, but it was all MCI’s work,” commented NextWave Telecom Inc. spokeswoman Jennifer Walsh. “MCI and others are negotiating contracts with C-block PCS providers, NextWave notwithstanding, and they want to become resellers soon.”
While it does not own any licenses, MCI has agreed to resell service from PCS licensee NextWave.
Part of MCI’s plan entails the FCC to require no payment for wireless licenses from 1998 through 2001, with interest and principal payments ramping up from 2002 to 2006. Interest, including that on any unpaid amounts and on deferred interest, would be accrued at Treasury bill rates, MCI proposed.
Stating that such a plan would bring wireless entrepreneurs’ license values in line with those of A- and B-block PCS players, MCI wrote, “The tiered debt-repayment structure will allow entrepreneurs to repay the debt plus interest on the debt as their cash flows develop over the 10-year license term. In easing financial terms, the FCC will want some assurance that licensees build out their systems quickly.” The company also wrote that buildout obligations be strictly enforced during this time period.
MCI also pushed for changing the non-attributable investor cap from 25 percent to 37.5 percent equity, a move it explained would “allow additional infusions of capital to these entities from strategic investors without changing the control exercised by the control group. The FCC would not have to change the existing requirement that the control group have 50.1 percent of the vote and de facto control.”
Waivers based on individual circumstances are MCI’s first choice for financial relief. It advised against a rulemaking process, which would delay any relief to entrepreneurs, thus slowing down network buildouts. “Even more significantly,” it wrote, “such delays could well-thwart entrepreneurial competition entirely by so clouding the entrepreneurs’ prospects as to virtually extinguish all financing options.”