AT&T’s desire for wireless spectrum sent them back in time today as the nation’s No. 2 carrier announced plans to acquire NextWave Wireless (yes, that NextWave) for $650 million. The deal will supply AT&T’s wireless operations with spectrum in the 1.7/2.1 GHz and 2.3 GHz bands.
The deal calls for AT&T to acquire all the equity of NextWave for $25 million plus a “contingent payment” of up to $25 million. AT&T would also acquire or retire NextWave’s approximately $600 million in debt.
Analysts noted NextWave’s current spectrum portfolio consists mostly of 2.3 GHz holdings, with smaller holdings in the 1.7/2.1 GHz and 2.5 GHz band. AT&T’s deal only concerns the 2.3 and 1.7/2.1 GHz bands.
AT&T said that the deal, if approved, will allow the carrier to add depth to its current 1.7/2.1 GHz spectrum holdings, which took a hit following its failed acquisition attempt of T-Mobile USA. The break-up agreement from that deal saw AT&T pay T-Mobile USA’s parent company Deutsche Telekom $3 billion in cash and hand over a significant portion of its 1.7/2.1 GHz spectrum holdings that T-Mobile USA is now earmarking for its own LTE deployment plans.
In addition the 2.3 GHz band would fit in with its ongoing attempt to free up that spectrum band for its LTE network. The 2.3 GHz band, which was initially auctioned in 1997, is currently mired in regulations that prevent its use for commercial mobile broadband services due to potential interference with adjacent satellite radio services.
AT&T and Sirius XM filed a petition earlier this year with the Federal Communications Commission seeking to reclassify spectrum usage in the 2.3 GHz band. The filing looks to preserve Sirius XM’s 25 megahertz of spectrum in that band, provide for 5 megahertz of guard bands on either side of those holdings, and free up 25 megahertz for mobile broadband services. AT&T noted in its acquisition of NextWave that if the 2.3 GHz proposal is approved it would be able to being using that band for LTE services within three years.
Wells Fargo Securities also noted in a research note that a good portion of NextWave’s 2.3 GHz spectrum would fall into the “guard bands” that according to the AT&T/Sirius XM proposal would not actually be used for services.
For AT&T, the deal seems to only add incremental depth to its current spectrum holdings, with the carrier expected to continue looking at adding to that depth through additional deals. Potential deals include Verizon Wireless’ announced plans to sell its 700 MHz A- and B-Block spectrum assets; Dish Networks’ plans to enter the wireless space; and possibly a spectrum deal with Clearwire, which has said it would look at selling off some of its excess 2.5 GHz spectrum holdings.
For NextWave, the proposed deal could mark the end of a colorful existence. The company rose to prominence in the wireless space during the personal communications services auctions of the mid-90s, having won a significant number of the 1.9 GHz spectrum licenses, only to then file for bankruptcy protection when it could not come up with the $4.7 billion in had placed in winning bids.
The company then spent years fighting the FCC to maintain control of those licenses, finally gaining that control in 2003.
That fighting also led to the FCC holding a re-auction of NextWave’s 1.9 GHz spectrum licenses it attempted to revoke in 2001, only to have the auction results nullified by a court decision saying the FCC did not have the right to revoke the licenses.
The company then in turn sold off most of those spectrum holdings to established players.
NextWave added to its portfolio during the 1.7/2.1 GHz (AWS) auction, having then sold off two-thirds of those licenses in 2008 for $150 million. NextWave has also been selling off other bits of its business operations over the years, which included chip and infrastructure concerns.
The company has also toyed with actually launching its own wireless service, something the company has always maintained it intended to do with its spectrum resources. Those plans initially involved a proposal to set up a wholesale wireless offering that it would then use to sell capacity and coverage to other carriers, a notion that has gained recent comparison’s to plans by Clearwire and the currently in-limbo LightSquared. However, those plans never seemed to amount to much and were seen by most as the company just “gaming” the system.
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