WASHINGTON-The Federal Communications Commission this week is expected to seek public input on the proposed transfer of 900 MHz dispatch radio licenses in 14 major markets from Geotek Communications Inc.’s creditors to Neoworld Inc., a start-up firm headed by the former president of Nextel Communications Inc.
It is unclear whether the Geotek-Neoworld deal will face opposition at the FCC.
Chadmoore Wireless Group Inc. and Southern Co., dispatch radio firms that opposed Nextel’s failed attempt to acquire all of bankrupt Geotek’s specialized mobile radio licenses, did not indicate last week whether they will contest the transfer of licenses to Neoworld. The permits currently are held by Geotek secured creditors Hughes Electronics Corp. and Wilmington Trust Co.
Mobex Communications Inc., which was outbid by Nextel for Geotek’s licenses in a private bankruptcy auction two years ago and is arguably the harshest critic of Nextel, was unavailable for comment.
After Neoworld and Geotek’s secured creditors entered an asset purchase agreement on March 24, there was grumbling in the SMR industry over whether Neoworld-led by former Nextel executive Brian McAuley and several ex-Motorola Inc. officials-was simply a front for Nextel.
At one time, Nextel, the nation’s top dispatch radio operator, was in line to buy all 191 SMR licenses from bankrupt Geotek for $150 million. But the Justice Department opposed the deal. Nextel controls 3.1 million of the nation’s 4.6 million SMR subscribers.
Nextel ultimately agreed to purchase only those 900 MHz licenses-about 80 in all-outside of the 14 markets from which Nextel was barred as part of a 1995 antitrust consent decree.
In exchange, U.S. District Judge Thomas Hogan last December approved a Nextel-Justice plan to terminate the 10-year consent five years sooner, on Oct. 30, 2000. Given that, it was suggested that Nextel does not need a front company. That is, if it was truly interested in Geotek’s SMR licenses, Nextel could buy them in five months.
“This is a substantial transfer of control,” said an FCC official.
Neoworld is based in Bloomfield, N.J., where Nextel was launched by McAuley and Nextel Vice Chairman Morgan O’Brien in 1987. Nextel did not return a call for comment on whether it has had business discussions with Neoworld.
While it is considering integrated Dispatch Enhanced Network technology, which was developed for Nextel by Motorola, DC/MA (digital channel multicarrier architecture technology engineered by ComSpace Corp.) and the European standard Tetra, Neoworld’s business plan is not geared to high-end business subscribers who make heavy use of mobile telephony and whose average monthly bill is around $100.
Indeed, it appears Neoworld wants to differentiate itself from Nextel and to capture-using advanced digital technology-the low-end and mid-range SMR market Nextel left behind.
“We’re looking for a backbone system that provides all the features that iDEN provides,” said McAuley.
Yet McAuley said building cellular-like iDEN systems in the 14 markets (New York, Boston, Atlanta, Miami, Orlando-Tampa, Houston, San Francisco, Chicago, Seattle, Denver, Philadelphia, Washington, D.C.-Baltimore and Detroit) appears to be cost prohibitive.
As such, Neoworld may choose to deploy advanced digital SMR technology with small groups of high-powered antennas in each market.
McAuley, drawing from a market analysis, said Neoworld is reaching out to dissatisfied analog SMR customers who are willing to pay $40 tops for digital dispatch service with limited mobile telephony.
Neoworld will price its SMR service at $28-$33, McAuley said.
“It’s definitely a dispatch-oriented company,” said McAuley. “We’re not going after the telephone market.” McAuley said the company hopes to launch service in most of the 14 markets by the end of the first quarter next year.
Neoworld has raised $150 million in private equity and is working to arrange a $100 million credit line to pay for the wireless licenses and roll out new digital dispatch radio services. “We’ve got a management that knows the business,” said McAuley.
Neoworld did not disclose how much it paid for Geotek’s licenses. Of the $150 million Nextel offered to pay for all of Geotek’s wireless permits, $131 million accounted for the 14-market licenses that Neoworld is buying from Geotek’s creditors.
It is not clear whether the Geotek-Neoworld transaction will need Justice Department approval.
McAuley said Neoworld has received positive feedback from SMR dealers around the country. He said the technology decision will be made in the next month or two.
Holding major ownership stakes in Neoworld are Madison Dearborn Partners (21 percent), First Union Capital Partners L.L.C. (13.6 percent), Goldman Sachs & Co. (13.6 percent) and various others (51.8 percent, none of whom individually hold a 10-percent or greater interest).
