NEXTWAVE ASSET VALUE DROPS AS HIGH COURT RULING LOOMS
Lynnette Luna
Telephony, May 13, 2002
Market conditions, protracted legal battle pummel spectrum’s worth
Negotiations have resumed for the much-disputed swath of spectrum owned by NextWave Telecom, but the licenses appear to be worth much less than they once were-a result of declining market conditions and the fact that the once spectrum-hungry carriers found other options.
Last week, Senate Appropriations Committee ranking Republican Ted Stevens, R.-Alaska, brokered a meeting between NextWave, the FCC and wireless operators that bid $16 billion in the re-auction of the wireless licenses last January. Congress failed to approve a settlement deal last year. And Verizon Wireless, which put up more than $8 billion in bids last January, has said it is not willing to pay the same amount it would have a year ago.
"Life has changed," said Roger Entner, program manager with The Yankee Group. "The carriers are no longer valued as high as they were, financial markets have dried up and the spectrum cap has been lifted."
When NextWave won the right to keep its licenses in appeals court last summer, company Chairman and CEO Allen Salmasi told Telephony the timing couldn't be better for the valuation of NextWave's assets. The FCC's appeal to the Supreme Court halted the confirmation of NextWave's bankruptcy reorganization plan, and a Supreme Court decision isn't expected until fall.
"Everyone views that spectrum as less valuable than it was when the last auction took place," said Jonathan Atkin, wireless analyst with RBC Capital Markets. "All are making alternative plans."
Sources close to NextWave said the Supreme Court will likely be the last stop for the company. "No one has the stomach for more litigation," said one source.
If the FCC wins, the issue will go back to an appeals court for another round. If NextWave wins, it may not be able to raise the money it needs to build out its networks. But NextWave's resale strategy may not work since few mobile virtual network operator companies are willing to take a risk in a shaky telecom environment.
The question now is how much NextWave is willing to settle for. "It's going to take a while for NextWave to lower its expectations," said Herschel Shosteck, president and chairman of Shosteck Associates. "We're easily talking about moving the decimal point over to 10¢ on the dollar."
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