NextWave Telecom Inc., at one point a symbol of all that could go wrong with government auctions, is hoping to use an auction to its advantage.
Less than two months after reaching an agreement with the Federal Communications Commission to give back a majority of its licenses in exchange for removing all claims and liens against its remaining holdings, NextWave has asked the bankruptcy court overseeing its reorganization for permission to auction six 10-megahertz spectrum licenses.
NextWave explained that the proposed July 8 auction, which the company hopes will generate at least $1.1 billion in bids, would include licenses that are not part of its buildout plans and would help facilitate its reorganization plans, expected to be filed next month. The markets in the auction proposal include New York City; Denver; Portland, Ore.; Tulsa, Okla.; and Sarasota and Tampa, Fla.
“The six licenses we intend to auction are valuable properties, but they’re not essential to our strategic plans,” said NextWave Chairman and Chief Executive Officer Allen Salmasi. “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. 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.”
NextWave noted in a government filing that it has been contacted by a number of parties interested in the licenses included in the proposed auction, including the four that were part of a group of licenses put in escrow, along with $85 million in cash as part of the global settlement with the FCC. NextWave also placed reserve amounts on the licenses-$930 million for New York, $38 million for Denver, $37 million for Tulsa, $35 million for both Portland and Tampa and $8.5 million for Sarasota, which are a little less than half of their winning bids during the FCC’s ill-fated Auction 35 in early 2001.
While NextWave still has to garner approval before moving ahead with the auction, analysts noted the pool of prospective bidders is likely to be smaller than during the FCC’s re-auction attempt, which should keep the overall bids for the licenses relatively low.
“Except for New York there are not many attractive markets included on the list,” said Roger Entner, program manager of wireless and mobile services at the Yankee Group.
Entner added that Verizon Wireless would likely be the main protagonist in a potential auction, but pointed out that the nation’s largest carrier likes to acquire spectrum for less than $2 per potential customer covered as evident by its recent spectrum acquisitions including the $750 million the company paid for 50 licenses from Northcoast Communications L.L.C. in 2002 that included a 10-megahertz license in New York. Cingular Wireless L.L.C. and AT&T Wireless Services Inc., which have been aggressive spectrum bidders in the past, are also not likely to open their checkbooks too wide as Cingular is in the midst of acquiring AWS for $41 billion and is having its own issues trying to minimize any potential spectrum divestitures from its combined license portfolio.
“Verizon will most likely be bidding against Verizon,” Entner said.
Entner also noted that bids for the Denver and Portland markets likely would be affected by Qwest Communications International Inc.’s own plans to sell its wireless network and licenses, which includes 10-megahertz licenses in both markets.
Despite the possible reduction of its once enormous spectrum portfolio, NextWave remains intent on launching a wireless broadband network.
The company said it will still have licenses covering 65 million potential customers in six of the nation’s 10 largest markets-New York, Boston, Philadelphia, Washington, D.C.-Baltimore, Detroit and Los Angeles. Its reorganization plan will detail various operational opportunities under consideration. Those opportunities include building out its licensed markets and entering into “joint ventures and similar collaborative deployments with other carriers and strategic partners.”
“The super-regional footprint we’re retaining presents an attractive opportunity to deploy a next-generation broadband wireless network that can provide high speed data and Voice-over-IP services to a broad range of consumer and enterprise customers,” Salmasi explained.
Previous network testing was centered around using CDMA2000 1x EV-based services, but the carrier noted earlier this year that it would begin testing a wireless broadband technology developed by IPWireless in the Las Vegas area.
NextWave also mentioned plans to move ahead with a response to a New York City proposal for a citywide dual-use wireless network that would provide both commercial communication and priority access for government agencies. RCR
