Dow Jones News Service via Dow Jones
NextWave may not want to sell wireless communications licenses to Nextel, but it may not have have a
choice.
The fate of the Hawthorne, N.Y., company's licenses will probably be determined by the FCC and other
creditors, not NextWave's management, said Credit Suisse First Boston analyst Cynthia Motz.
NextWave's Salmasi has made repeated negative statements about a possible sale to Nextel, but Motz said
she is surprised investors give them much weight.
"He doesn't have the say in the matter," Motz said, "Nextel is not negotiating with NextWave, it is
negotiating with the creditors."
It isn't clear that NextWave has the resources to quickly offer service on a large scale, Motz said. Whatever
settlement is finally reached willprobably take time and come after challenges and jurisdictional wrangling,
she added.
Officials at NextWave and the FCC weren't immediately available for comment.
Nextel's stock may have been ripe for profit-taking, said Motz and Warburg Dillon Read analyst Kevin
Condon. Fueled by strong operating results and feverish takeover speculation, the stock has doubled since
June.
MCI WorldCom Inc. (WCOM) talked to Nextel about buying it, but the talks faltered over price and
Nextel's heavy debt burden. MCI WorldCom has since agreed to buy Sprint Corp. (FON), which has the
nation's second-largest wireless business. That merger has fueled speculation about future industry
consolidation.
Whatever the future brings, some investors are ready now to pocket their gains, particularly if anything
seems to threaten the stock's high valuation,analysts said.
While Nextel has the resources to carry out its plans, investors worry that it might not have enough capacity
to meet future demand for wireless Internet and data services. Nextel serves businesses, so the ability to
offer those services will be critical.
"There was anticipation that the spectrum would be important for Nextel," said Salomon Smith Barney
analyst Thomas Lee.
"Spectrum is a scarce asset today," Lee said. "Having sufficient spectrum is going to be very important. Any
company that doesn't have the capacity to put both voice and data on its network is going to be in big
trouble."
Lee said he isn't implying that Nextel will face a shortage, but he said the company's bid for the NextWave
licenses raises the question.
Condon said the market's reaction to NextWave's statement was overdone, given that NextWave has
objected to Nextel's efforts to buy the licenses all along.
Analysts haven't included the NextWave assets in their projection, Condon said, so it isn't as if something
investors were counting on had been taken away.
The company has been a leader in wireless data thus far and while it may not have as much space on the
airwaves as some competitors, it is using its capacity efficiently and has found an effective, if expensive, way
to recycle capacity, Condon said. The costs have been partly offset by Nextel's higher-than-average
customer bills and low customer turnover, he said. |
