NextWave agrees to sell wireless licenses

Posted: Sunday, November 18, 2001

WASHINGTON (AP) -- The government settled its long airwaves battle with NextWave Telecom Inc. on Friday with a $16 billion deal that could improve service for mobile-phone customers in dozens of U.S. cities. The settlement means licenses will be issued to Alaska Native Wireless LLC, a consortium of three Alaska Native corporations.

The new Native venture drew industrywide attention in January with $2.9 billion in bids on wireless licenses auctioned by the Federal Communications Commission. The company allied with AT&T Wireless Services Inc., which put up $2.6 billion of the money and owns a 39.9 percent share.

Under the agreement, NextWave would give up its wireless airwaves, which will then be purchased by the nation's biggest mobile telephone carriers to fill coverage gaps in congested markets. The deal still must be endorsed by Congress, the Justice Department and a New York bankruptcy judge and survive any legal challenges.

''The settlement means that scarce spectrum tied up for years in litigation will now be available for wireless providers, including Alaska Native Wireless, to provide service to consumers across the United States,'' said Conrad Bagne, one of the managers of Alaska Native Wireless, in a statement Friday.

NextWave won the airwaves in a 1996 government auction, but paid just $500 million of its $4.7 billion bid before seeking protection from creditors, largely the FCC, in a New York bankruptcy court.

The FCC then seized and re-auctioned the licenses, bringing $15.8 billion for the same chunk of spectrum from major telecommunications companies, including Verizon Wireless and affiliates of Cingular Wireless, VoiceStream Wireless and AT&T Wireless.

But a federal appeals court ruled in July the government was wrong to have resold the licenses. The judge ordered them returned to NextWave. The FCC has asked the Supreme Court to overturn that decision.

It took weeks of intense negotiations for the parties to agree on a resolution of the dispute.

NextWave insisted all along it intended to build itself into a viable wireless carrier. Chairman Allen Salmasi acknowledged the settlement takes the company ''down a different path.''

''It's a winning solution for all parties,'' he said.

Wireless companies hailed the agreement as a major step.

''It's too early to pop the champagne corks, but with the Bush administration's leadership on Capitol Hill to enact legislation that will support the recently announced settlement, we are encouraged that the NextWave situation will be fully resolved very soon,'' said Denny Strigl, president and chief executive of Verizon Wireless.

Under the deal, the carriers would pay the government essentially what they bid in the second auction, by the middle of next year, to purchase NextWave's licenses, Verizon spokesman Jeffrey Nelson said.

The new spectrum will allow them to expand services in lucrative but overcrowded markets such as New York, Los Angeles, Chicago, Seattle, San Francisco, Washington and Philadelphia. Verizon would get by far the largest share, followed by AT&T Wireless's affiliate.

The FCC would transfer about $9.6 billion of the carriers' money to NextWave. After paying taxes and other fees back to the government, investors in the 60-employee Hawthorne, N.Y.-based company would net more than $5 billion. NextWave has yet to build a network or offer service.

The company still plans to launch service sometime next year, through networks being built in Detroit and Madison, Wis., which are areas covered by five licenses NextWave actually paid for.

The government would gain $10 billion for the Treasury, Powell said. That's about $6 billion less than if the second auction were upheld. The government doesn't plan to drop its Supreme Court challenge until it's clear the settlement will stand.

With all sides, especially the government, out to minimize the risk of losing money from defaults or legal challenges, the deal foundered over whom would be paid first and how the money and licenses would be transferred.

Congress will be asked to pass legislation funneling all legal challenges to one federal appeals court in Washington, Powell said. The legislation also is needed to give the FCC authority to pay NextWave, said a source close to the negotiations. Most involved in the deal believe key Capitol Hill players are receptive to the terms.

Sen. John McCain of Arizona, the top Republican on the Commerce Committee, said he will review whether the settlement protects ''the American taxpayer from being shortchanged.''


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