NextWave Awaits Word From Top U.S. Court on Airwaves (Update1)
By Greg Stohr and Jonathan Cox
03/01 17:27
Washington, March 1 (Bloomberg) -- NextWave Telecom Inc. may learn soon whether its five-year legal saga over control of airwaves worth as much as $16 billion is nearing an end.
The U.S. Supreme Court will announce as early as Monday whether it will consider the Bush administration's appeal seeking to reclaim that spectrum.
A decision to hear the case would create new questions about rights to the frequencies, which have been coveted by Verizon Wireless Inc. and 20 other companies. It might lead to years of additional litigation at a time when wireless-phone companies need capacity for new services.
``This could go on and on,'' said Paul Glenchur, analyst with Charles Schwab's Washington Research Group.
NextWave, which now is in bankruptcy reorganization, wants the nation's highest court to reject the government's appeal and erase all doubts about its ownership of the licenses.
NextWave bid $4.7 billion for the airwaves at a 1996 auction designed to put spectrum in the hands of fledgling wireless companies. The value of those frequencies quickly fell, in large part because the Federal Communications Commission flooded the market with additional airwaves, NextWave says.
The company filed for bankruptcy protection in 1998 after paying only $500 million of its bid. It now says it can pay the full amount.
Bankruptcy Fight
The U.S. Court of Appeals for the D.C. Circuit said the FCC couldn't revoke the licenses. The court said NextWave's bankruptcy filing forced the FCC to wait in line with other creditors for payment.
The Bush administration says a bankruptcy proceeding can't trump the FCC's licensing rules.
The FCC is seeking to reinstate the results of a second auction of the NextWave spectrum that raised $15.9 billion from 21 carriers, including Verizon and companies backed by AT&T Wireless Group and Cingular Wireless.
By voiding that auction, the appeals court ``effectively confiscated licenses from applicants who stood ready to put that spectrum to its most efficient use,'' the Justice Department and FCC say in their appeal.
NextWave points to a federal bankruptcy law provision that bars a governmental unit from revoking a license solely because an entity ``has not paid a debt that is dischargeable'' in bankruptcy. The Hawthorne, New York, company says the FCC violated that provision.
``Nonpayment was the sole, exclusive, automatic basis for the FCC's action,'' NextWave argues. The company's rose 30 cents to $5.90 in trading today.
Settlement Talks
The Supreme Court rejects the vast majority of appeals filed there, and the justices have twice before rebuffed cases raising similar issues.
Still, the court always gives close attention to appeals by the U.S. government. The justices were scheduled to discuss the case at their private conference today.
Hearing the appeal may mean two to three more years of litigation. The justices probably wouldn't rule for a year, and if the government won, NextWave would be able to press additional arguments at the appeals court level.
The prospect of more litigation might spur new settlement talks with Verizon and other companies interested in the spectrum, analysts say.
``If the Supreme Court takes it, we're just looking at buying some time for some kind of negotiated arrangement,'' Glenchur said.
New Complexities
At the same time, Supreme Court consideration would make any discussions more complex. Because an agreement would require the FCC to abandon its appeal, the talks would have to include the agency. Because the U.S. Treasury would be affected, Congress would have to approve the deal.
An earlier settlement collapsed when Congress didn't sign off by the Dec. 31, 2001, deadline. Senators Ernest Hollings and John McCain had opposed the agreement.
The accord would have given Verizon and several other companies control of the licenses, while paying NextWave more than $5 billion to drop its claims.
``Our sense is the FCC leadership would probably still be interested in a settlement,'' said David Kaut, associate analyst with Legg Mason Inc. in Washington. ``It's not clear that Senator Hollings and possibly other members of Congress would let them.''
More Hurdles
Verizon, meanwhile, has signaled its interest may have flagged since it bid $8.8 billion at the second auction a year ago. The company dropped its own Supreme Court appeal in the NextWave case and sued the U.S. to invalidate the results of the second auction.
At a minimum, Verizon would want to get the airwaves at a lower price, analysts say.
Even if the Supreme Court rejects the government appeal, NextWave will have some legal hurdles to clear. Most significantly, its reorganization plan requires a bankruptcy judge's approval.
The company also will have to decide whether to build its own wireless network or sell its rights to affiliates of larger companies.
NextWave last year said it had lined up $5.5 billion in financing, including a $300 million investment from Qualcomm Inc. and a $2.5 billion loan commitment from UBS Warburg LLC.
quote.bloomberg.com |
