The resignation of two Comcast Corp. representatives from Nextel Communications Inc.’s board of directors and Comcast’s request to register its Nextel stock for sale are part of a shift from a strategic to financial investment in Nextel, Comcast said.
“Over time, our investment has taken on a different tone,” said Comcast spokesman Bill Dortlman.
Comcast is one of the three cable TV operators that aligned with Sprint Corp. in the Sprint Telecommunications Venture, bidding as WirelessCo L.P. in the personal communications services auction ended March 13. The group holds licenses in 29 markets.
While the investment shift has been gradual, Comcast faced a visible conflict of interest in April when the Craig McCaw family announced a $1.1 billion investment in Nextel. McCaw is AT&T Corp.’s major stockholder. AT&T-which won PCS licenses in 21 markets-will compete with the Sprint PCS venture.
Comcast also has asked Nextel to file a shelf registration statement for a secondary public offering of the 11.3 million Nextel common shares of stock owned by Comcast. The move allows for possible sale of the stock. At Nextel’s current trading price of $14 a share, that totals about $158 million.
Comcast first entered into investment agreements with Nextel in 1992, and through a series of transactions acquired nearly an 11 percent stake in the enhanced specialized mobile radio operator.
Comcast postponed further investment in Nextel on Jan. 31, at which time Comcast was scheduled to make a $50 million injection in Nextel. The deal hinged on the satisfactory technical performance of Nextel systems in Los Angeles and San Francisco. Comcast did agree to sell 43 SMR channels at 800 MHz in the Philadelphia area for $15 million, using 462,963 shares of Nextel stock at $32.40 per share. That move reduced Comcast’s $50 million obligation to $35 million, payment of which has been extended to June 30.
Dortlman said the investment was postponed because Nextel’s systems weren’t up to the agreement’s standards, some of which were drawn up in 1992. “Specifically, it calls for Nextel to be competitive to the incumbent cellular operator in the market. And it was evident at that time they weren’t,” Dortlman said.
It’s no secret Nextel has encountered problems with its Motorola Inc. technology, now called Integrated Dispatch Enhanced Network.
What may not be well known is the latest deal between Motorola and Nextel, said Paul Blalock, executive director of Nextel investor relations. A reconfigured iDEN is being created that will change the vocoder rate for the interconnect mode, he said. “The cost is offset by price reductions in the new (equipment) purchase agreement,” Blalock said.
Even if the technology succeeds, the idea that Nextel ever will be “competitive to the incumbent cellular operator,” or even intends to be, is a matter of discussion. Nextel’s recent announcement of its clear marketing focus to concentrate on mobile work groups is something Comcast will consider, Dortlman said. “We want them to succeed. There has just been an evolution for us.”
Nextel expects to close three significant transactions by the end of June-the purchase of SMR channels from Motorola, McCaw’s investment and a merger with OneComm Corp. Comcast does not intend to exercise “come along” rights in any of those deals to keep its stake at close to 11 percent, Blalock explained.
However, Comcast has informed Nextel that it intends to exercise its come along rights when the pending Dial Page Inc. merger is done. The Dial Page transaction may be closed by year’s end.
