WASHINGTON-The five largest bidders in the Federal Communications Commission’s recent re-auction of PCS licenses sent a letter last week urging the agency to make a deal with bankrupt NextWave Telecom Inc. that would have NextWave relinquishing its licenses for a cash payment near NextWave’s original bid amount.
“What we propose is the only way to achieve a win-win result between the public interest, NextWave’s interests and the interests of the auction winning bidders. The public will win because this scarce spectrum will be immediately deployed to its highest and best uses, as determined by the market, and the American people will still receive most of the $16 billion pledged in the auction. NextWave will win because its bankruptcy creditors can be fully satisfied and its post-bankruptcy investors and equity holders can achieve a full return on their investment, without the risks of continued litigation and other business risks. Winning bidders in the re-auction would benefit only by getting Salmon PCS L.L.C., Verizon Wireless and VoiceStream Wireless Corp.,
The letter begins by calling for NextWave to dismiss all of its claims to the licenses in return for cash and forgiveness of the liabilities NextWave has to the government. NextWave bid $4.7 billion for the licenses in 1996. The licenses, which were cut up to allow big carriers to bid on spectrum originally set aside for small businesses, were re-auctioned earlier this year for nearly $16 billion.
The carriers suggest bidding should begin at NextWave’s original bid amount.
“We suggest that the negotiations which we are urgently requesting should start at approximately $4 (billion) to $5 billion, which is the amount that NextWave itself determined was the value of the licenses when it bid $4.7 billion on them. This would represent a full return on NextWave’s original bid. From there, the government well might argue that a lower number (below $4 billion) is appropriate, while NextWave could be expected to argue that it is entitled tWave receives a substantial cash payment and the government receives all of the remaining auction proceeds-all financed by our companies and the other winning bidders-there will be significant incentive to settle.”
NextWave said it is not interested in the proposal.
“The FCC and the incumbent carriers told the [D.C. Circuit] that NextWave would get its license back if we prevailed, and we did prevail. … Remarkably, despite their statements to the [D.C. Circuit], the same carriers who urged the agency to stop NextWave’s reorganization are again threatening to tie up NextWave’s licenses with further litigation unless their demands are met. Today’s filing further reveals that the petition several of them filed last week at the FCC is nothing more than a baseless and unfounded effort to stop a competitor from entering the marketplace. … It’s time to stop litigating and start building out. Competition should be carried out in the marketplace, not in the courts or through inappropriate use of the is is the best way to ensure that the valuable mobile licenses purchased at auction are put into the hands of carriers to deploy immediately to serve customers,” said Strigl.
At RCR Wireless News’ deadline, NextWave was preparing a response to the carriers’ ownership-review petition.
Meanwhile, the FCC and the Department of Justice filed a brief last week in the bankruptcy case of Kansas PCS Ltd. The government urged the U.S. Court of Appeals for the 10th Circuit to declare that communications law trumped bankruptcy law, as the 2nd Circuit Court ruled in late 1999.
