Wholesale Channel:   NextWave Settlement Remains in Limbo

Posted: 2/2002

Wholesale Channel

NextWave Settlement Remains in Limbo

By Kim Sunderland

Mobile telephone companies want a resolution to the lengthy dispute over wireless licenses held by bankrupt NextWave Telecom Inc., just as further involvement by Congress and now the U.S. Supreme Court becomes a heavier cloud hanging in an already overcast sky.

“Industry players seeking NextWave’s spectrum are growing impatient,” according to a Legg Mason Inc. analyst’s report. “At least some are not keen on continuing down a highly uncertain path with so much money on the line.”

The trouble began in 1996 when NextWave, based in Hawthorne, N.Y., bought dozens of licenses for $4.7 billion but then sought bankruptcy protection after paying the federal government only $500 million of that.

The FCC repossessed and re-auctioned the airwaves — sparking a legal battle over ownership of the licenses. A federal appeals court ruled the FCC could not repossess the licenses from NextWave just because of nonpayment.

And the clouds continue rolling in.

FCC Chairman Michael K. Powell revealed in mid-January the commission is determined to reclaim the licenses and is appealing the lower court’s ruling to the U.S. Supreme Court.

Meanwhile, 13 U.S. mobile telephone companies involved in a second auction, including Verizon Wireless and VoiceStream Wireless, have asked the government to return their $3.2 billion in down payments for the NextWave licenses.

The winners during that second auction “now face an indefinite period of time before there is any prospect that the commission could lawfully provide them with the NextWave licenses that they won,” the carriers say in a petition they filed in January with the FCC. At press time, the FCC was exploring ways it would handle this request.

A proposed settlement in which the second auction winners would have paid $15.85 billion for the airwaves — netting bankrupt NextWave about $5.85 billion to relinquish its claim to the airwaves and giving the government $10 billion from the deal — fell apart in December when Congress failed to act to authorize the deal.

Powell said a settlement is possible, but he’s not sure how Congress would react to one. He says that he worries if the battle over the licenses returns to court, resolution may be elusive until 2004.

However, sources in the office of Senate Commerce Committee Chairman Sen. Ernest “Fritz” Hollings (D-S.C.) say hearings could be conducted this month. Some mobile phone companies have said if Hollings were willing to hear them out, they would revive settlement talks. And NextWave remains open to discussing another settlement proposal. The company also plans to continue building out its network and offering airtime on a wholesale basis to content providers and other mobile phone companies.

In the meantime, Verizon Wireless says it won’t consider another settlement until it gets back its money. “The time has come for the commission to return … more than $3.1 billion in down payments, which the commission has held interest free since February 2001,” according to the mobile companies’ filing at the FCC.

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