Nextwave ( surf ) to re-file IPO in next two weeks
By Nick Louth
NEW YORK, Jan 20 (Reuter) - Wireless wholesaler Nextwave Telecommunications Inc is to set its
delayed initial public offering in the next two weeks, finally bringing to fruition a fund-raising exercise
of breathtaking ambition.
Nextwave, an unknown in the industry until it began bidding in 1996's C-band Personal
Communications Services (PCS) auctions, has spent a staggering $4.7 billion on wireless licenses for
the third largest network in the U.S.
"We expect to file an amended S1 to the SEC in the next couple of weeks," said a source close to
the company.
The company planned to go public last summer, but after a series of delays finally came to a parting
with lead manager Merrill Lynch in the fall. It must now amend the S1 document it sent to the
Securities and Exchange Commission.
Revised documents are not yet finalised, but Smith Barney and Lehman Brothers are set to be
co-lead managers of the $200 million equity offering and CIBC Wood Gundy is leading the $300
million debt offering, the source said.
Nextwave declined to comment ahead of the re-filing, and the source declined to be identified.
Nextwave's total outlay may top $8 billion, when the $3-3.5 billion cost to build the network is
included.
The build-out is covered by $1.4 billion in unconditional vendor financing from companies such as
Lucent Technologies Inc and Hughes Networks Systems ( GM Hughes Electronics Corp ), and
another $2.1 billion in conditional vendor financing.
"The cost of the system is, as you can see, fully funded," the source said.
Some analysts have been spooked by the huge debt Nextwave is taking on and see the wireless
market as being dangerously overcrowded already. Nextwave, however, is sanguine.
"The company has pre-sold 35 billion network minutes of use. To put it in perspective, that is equal
to the entire U.S. cellular industry's 1994 traffic," the source said.
While Nextwave has huge debts, it will not incur the massive advertising, marketing and customer
acquisition costs incurred by its clients and their rivals as they duel in the market place for fickle
customers.
Nextwave sees its success being backed by the 30 percent plus growth in U.S. wireless usage, and
the low costs to get its retail customers into that market.
The company has 21 customers, headed by MCI Communications Corp , which in August entered a
10-year agreement to take 10 billion minutes of use on the network.
Nextwave is essentially offering off-the-shelf digital wireless service to any reseller that could want it.
These already include long distance and local telephone firms who need wireless to bundle with their
wired offerings, other wireless firms which have holes in their own license coverage and electric
utilities who see a future in telecom.
But potential users could embrace any firm with a strong brand and market presences.
These could include retailers like Wal Mart Stores Inc ( Wal-Mart Stores Inc ) which already sell
consumer telecom devices, or companies like Walt Disney Co if it decided to offer a kids phone
service under its brand name, the source said.
Nextwave shareholders include Qualcomm Inc -- the inventor of the digital technology CDMA that
is used on the network -- Sony Corp 6758.T , NTT Corp 9432.T , and Korea Electric Power
Corp 74000.KS , plus institutions like ING Capital, Triumph Capital and Kingdon Capital.
The foreign ownership is 22 percent. No shareholder has more than five percent of the company.
Nextwave says doubters should judged it by the quality of its backers.
"Look at the names of the companies allied with us. Why would you put up the money unless you
knew it would work? You have more than your reputation on the line," the source said. |
