Subject: [NEXTEL-1] FCC Calls Truce With NextWave - Telecom Will Keep Some Of Wireless Licenses

From: [email-masked]
Date: Wed, 21 Apr 2004 11:58:09 -0400

FCC Calls Truce With NextWave - Telecom Will Keep Some Of Wireless
Licenses

By Griff Witte
Washington Post Staff Writer
Wednesday, April 21, 2004; Page E01

The Federal Communications Commission yesterday called a truce with a
phone company it has battled in courts for years, agreeing to a deal
that promises to put billions of dollars worth of wireless licenses back
on the market.

The proposed agreement calls for NextWave Telecom Inc. to return to the
FCC most of the licenses it purchased from the government during an
auction in 1996. The company went bankrupt soon after the sale,
prompting the FCC to try to take the licenses back. The dispute spawned
a protracted legal fight that wound its way through the courts until the
Supreme Court ruled in NextWave's favor last year.

In exchange for turning back most of the licenses to the FCC, NextWave
gets to keep a potentially lucrative 10 percent slice of the originally
purchased spectrum. NextWave's share is made up of licenses stretching
from Washington to Boston, including the most valuable spectrum market
of all, New York. NextWave will have to give the FCC a cut of the
profits if it decides to sell its remaining licenses, as many analysts
expect it will.

The FCC plans to auction off its share of the licenses within months,
meaning spectrum that has gone unused for years while the matter was
tied up in the courts could finally be put to use.

"After eight long years, we can finally end the litigation and begin the
innovation," said FCC Chairman Michael Powell in a statement. "This
landmark agreement takes valuable spectrum resources out of the courts
and will put it in the hands of consumers who can finally use it."

Representatives for Greenwich, Conn.-based NextWave also had reason to
celebrate. Asked if the company and its investors will turn a profit
from the deal, Doug Teitelbaum, who represented the company's side in
negotiations, said "absolutely. I wouldn't have done it otherwise."
Teitelbaum is a managing principal at Bay Harbour Management, one of the
biggest investors in NextWave. He said the licenses that remain in the
company's hands are potentially quite valuable in a market that is
starved for spectrum.

The deal is subject to the approval of a federal bankruptcy court in New
York, where NextWave hopes to emerge from Chapter 11 protection by the
end of the year. Members of Congress previously scuttled another attempt
to resolve the dispute, but the current proposal does not appear to
require congressional action.

NextWave officials would not say yesterday whether they plan to sell
their remaining share of the spectrum, or use the airwaves to start a
commercial service. In August, the company shed about 20 percent of the
disputed licenses, trading them to Cingular Wireless LLC for $1.4
billion. Under the deal, which was finalized earlier this month,
Atlanta-based Cingular received 34 licenses covering 83 million
potential customers in major markets such as Washington, Baltimore and
Boston. The U.S.  government received roughly half the proceeds from the
sale.

More deals are possible as the major wireless carriers attempt to meet
growing consumer demand for wireless services such as text messaging and
Internet access.

NextWave originally won 63 licenses in 1996, just a year after its
founding, as part of an FCC auction intended to encourage
entrepreneurship. The company agreed to put 10 percent down and pay off
the balance of the $4.74 billion cost over the next decade.

Finding itself in financial trouble just a year later, the company asked
the FCC to restructure the payment schedule. But the FCC refused, and
NextWave had to file for bankruptcy protection. With the FCC not getting
paid for the licenses, the agency seized the rights back, and attempted
to resell them for $15.8 billion in a 2001 auction.

The dispute made its way to the Supreme Court where, in January 2003,
the justices ruled eight-to-one that the FCC had violated federal law by
seizing an asset from a company in bankruptcy.

Blair Levin, a telecom analyst with Legg Mason, said the spectrum today
is probably worth between the $4.74 billion that NextWave offered for it
in 1996 and the $15.8 billion that other carriers were willing to pay in
2001.

http://www.washingtonpost.com/wp-dyn/articles/A29412-2004Apr20.html

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