Subject: [NEXTEL-1] BellSouth bids for WorldCom unit

From: Marcel <[email-masked]>
Date: Tue, 13 May 2003 14:14:15 -0400

BellSouth bids for WorldCom unit
Tue May 13, 6:00 AM ET

by Chris Nolter

BellSouth Corp. has launched a $65 million stalking-horse bid for
WorldCom Inc.'s fixed wireless unit, which the bankrupt telecom once
touted as one of the centerpieces of its high-speed Internet strategy.

The deal would represent a hefty loss for
WorldCom, which recently rebranded itself under
the MCI name and has invested more than $1
billion in the fixed wireless business.

Fixed wireless networks allow carriers to provide
voice and broadband services using wavelengths
rather than wires.

"By using the airwaves, MCI will be able to offer
more customers in more markets a new,
competitive alternative for broadband access
services," the company said on its Web site.

But the first generation of fixed wireless networks
failed to live up to the hype.

"It is a business model that was flawed from the
start," wrote Greg Gorbatenko of Loop Capital
Markets LLC in a recent note. The technology
attracted plenty of interest, but quality and cost
issues squelched its development.

Sprint Corp., which also owns extensive fixed
wireless spectrum licenses, halted deployments
into new markets. AT&T Corp. abandoned its
fixed wireless initiative. Two other providers,
Winstar Communications Inc., and Teligent Inc.,
went bankrupt.

"Unlike a hard line, it is more susceptible to
distortion from things like trees and weather,"
Gorbatenko wrote. "Wireless works for phones
since users understand the give and take with
quality versus mobility."

Some of the technical and economic problems
have been addressed in the second generation of
fixed wireless technology.

Recent moves by the Federal Communications
Commission (news - web sites) could make the
unit's network more desirable. The commission plans to phase out a
requirement that the Bells share broadband lines with competitors. Fixed
wireless network could provide an alternative route for carriers to reach their
customers.

WorldCom's spectrum potentially covers 40% of U.S. homes, Lindsay
Schroth of The Yankee Group noted in a report, and its fixed wireless
operations could be valuable in the coming years.

Since December, IPWireless, Aperto Networks and Soma Networks
have received infusions from venture capital firms, Schroth wrote.

WorldCom pleadings state that 40 parties requested information about the
fixed wireless business, and 10 submitted bids.

A hearing on auction procedures is set for June 3, with the sale hearing to
follow July 8. Objections to the sale are due by July 3.

The sale agreement provides BellSouth with a $1.4 million break up fee and
$520,000 expense reimbursement if another suitor wins. The Bell put $3.9
million on deposit.

Lazard and Weil Gotshal & Manges LLP advise WorldCom.

BellSouth's counsel is Kilpatrick Stockton LLP. The company did not use
financial advisers.

http://atlanta.bizjournals.com/atlanta/stories/2003/05/12/daily12.html

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