WASHINGTON-Bankruptcy Judge Adlai S. Hardin Jr. has given bankrupt NextWave Telecom Inc. the green light to proceed with the sale of 34 licenses to Cingular Wireless L.L.C., a sale that according to bankruptcy law must first be put out for higher and better offers.
Cingular has agreed to pay $1.4 billion for the licenses, a portion of which will be surrendered to the Federal Communications Commission. If a higher and better offer is made, it must include a $21 million breakup fee for Cingular.
As part of the proposed NextWave/Cingular sale, the FCC will be paid $714 million unless a better and higher offer is found, and then the FCC could receive as much as $734 million.
NextWave still owes the government at least $4.7 billion for the licenses it won at auction in 1997 and then were subject to a bankruptcy saga that was finally settled in January by the U.S. Supreme Court.
The better-and-higher-offer auction is only one of several hurdles the NextWave/Cingular deal must jump before the deal is completed and everyone gets their money.
First comes the auction. To participate in the auction, a prospective bidder must offer to buy the same licenses that Cingular is buying for at least $61 million more than the $1.4 billion Cingular is willing to pay. The $61 million would pay a breakup fee to Cingular and then ensure that the licenses were bought for $40 million more than Cingular offered.
Once all of the prospective bidders have submitted offers along with a 1.5-percent deposit, an open auction will be held in New York Sept. 23.
The final sale is expected to be approved by Bankruptcy Judge Hardin Sept. 25.
NextWave and Cingular must file license-transfer applications with the FCC. The FCC has an incentive to review the applications as quickly as possible because beginning Feb. 28 there are various escape clauses from the pact to ensure the value of the spectrum does not change enough to make it unprofitable for either NextWave or Cingular.
Approval of the license-transfer applications by the Department of Justice is also necessary to ensure that the transfer complies with antitrust law. Since the FCC removed the spectrum cap, Justice Department approval is the only explicit antitrust approval required.
