WASHINGTON-A little more than a year ago, Nextel Communications Inc. shocked the telecom world by announcing it had reached an agreement with the Federal Communications Commission to buy the licenses of bankrupt NextWave Telecom Inc.
A year later, the FCC says it will re-auction NextWave’s licenses to the highest bidder, and Nextel has seen its fortunes tied to the twists and turns of the NextWave-FCC litigation.
From the beginning, policy-makers questioned Nextel’s claims and within weeks the FCC was back-pedaling from the “Nextel agreement” under pressure from the wireless industry.
As the legal wranglings over NextWave’s licenses continued in Washington and New York, Wall Street seemed to believe Nextel eventually would gain access to the necessary spectrum and its stock benefited.
Nextel’s stock-split-adjusted price on Aug. 10, 1999, was $23, rising to $26.56 Aug. 12 with the initial announcement. With this $3 jump, Nextel’s stock began a steady climb.
The day before Thanksgiving, Nov. 24, 1999, the U.S. Court of Appeals for the 2nd Circuit said it was overturning both a bankruptcy court’s and a federal district court’s decisions, which said the FCC had erred in awarding NextWave’s licenses. Nextel’s stock price broke through the $100 mark (although the stock has since split). It closed at $97.75 Nov. 23, but jumped to a closing price of $115.06 Nov. 24.
In the end, the FCC won in federal appeals court and left Nextel dangling in the wind.
NextWave has appealed the 2nd Circuit’s decisions. The Supreme Court will decide by October whether to hear the case.
NextWave’s litigation is not the only case that could determine the fate of C-block licenses. The wireless industry and the FCC are awaiting a decision in the bankruptcy case of Metro PCS (formerly General Wireless Inc.) from the U.S. Court of Appeals for the 5th Circuit. Oral argument in that case began Feb. 1.
Notwithstanding the legal uncertainties, Nextel is awaiting word whether it will be allowed, along with other large players, to participate in the re-auction of the NextWave licenses, scheduled for Nov. 29. The FCC is expected to release rules for the auction soon.
Smaller players, which have urged the FCC to keep the designated-entity rules in place and not allow large players to participate, argue that large players, including Nextel, are not as spectrum-constrained as they want others to believe.
Citing a Washington Post story dated July 19, the Personal Communications Industry Association told the FCC that even Nextel does not believe it is spectrum-constrained.
“Nextel is not even close to exhausting its current spectrum allocation. … The bleak picture painted by these carriers overstates the immediate and pressing need for additional spectrum. While PCIA does not disagree with the long-term need of the industry for additional spectrum, nothing in the record to date justifies returning the C- and F-block[s] to satisfy the alleged needs of the largest carriers at the expense of new entrepreneurs,” said Brent Weingardt, former PCIA vice president for government relations.
