Yes Mq - this is a nice way for at least one government/private industry saga to close.
Reuters
Supreme Court: NextWave Can Keep Licenses
Monday January 27, 4:22 pm ET
By James Vicini
WASHINGTON (Reuters) - Bankrupt NextWave Telecom Inc. (Other OTC:NXLC.PK - News) can keep valuable wireless licenses, the U.S. Supreme Court ruled on Monday, ending a five-year battle by regulators to repossess them because the company failed to pay on time.
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The high court voted 8-1 to affirm a U.S. appeals court decision that the Federal Communications Commission had violated federal bankruptcy law when it tried to take back the licenses and resell them.
The law bars the FCC from revoking licenses held by a debtor in bankruptcy even though it failed to make timely payments, wrote Justice Antonin Scalia in the 15-page decision for the court majority.
"In short, a debt is a debt, even when the obligation to pay it is also a regulatory condition," Scalia said.
The high court decision could pave the way for NextWave to launch its long-promised wireless data service, but it would be entering a depressed, fiercely competitive telecommunications market with cut-throat pricing and hard-to-find investor backing.
NextWave bid $4.7 billion for 90 wireless licenses in 1996 that covered major cities like New York and Los Angeles, but filed for bankruptcy in 1998 after paying only $500 million. The FCC tried to take them back and to resell them to carriers like Verizon Wireless (NYSE:VZ - News; London:VOD.L - News) and others.
NextWave Chairman and Chief Executive Allen Salmasi said last October, after arguments before the Supreme Court, that the company would be willing to partner with other mobile carriers, who bid almost $16 billion for the airwaves.
"We are extremely pleased with the decision because it clears the way for us to move forward and complete our reorganization," Salmasi said in a statement on Monday. A company official was not available for further comment.
NextWave shares were up 51 cents at $2.81 with about 9.4 million shares changing hands on the Pink Sheets market in late afternoon trading.
MAJORITY NOT PERSUADED
The government and NextWave's rivals argued the FCC did not revoke the licenses solely because of non-payment. They also said the debt owed from purchase of the licenses could not be reduced in bankruptcy court and that the appeals court decision violated existing federal law.
"We find none of these contentions persuasive," Scalia said in the majority decision. Under bankruptcy law, the fact that the FCC had a valid regulatory motive for its action is irrelevant, he wrote.
The court's lone dissenter, Justice Stephen Breyer, disagreed, saying he would have set the appeals court decision aside and sent it back for more proceedings. The government revoked the licenses not because the company had gone bankrupt, but simply because it failed to pay a promised installment, he argued.
The law's purposes "are to stop bankruptcy-related discrimination and to prevent government licensors from interfering with the 'fresh start' that bankruptcy promises, but not to prevent government debt-collection efforts where these concerns are not present," Breyer said.
FCC Chairman Michael Powell, who failed to win congressional approval of a settlement of the litigation he brokered in late 2001, said in a statement that the decision brought needed certainty to an unsettled area of the law.
TOUGH MARKET SEEN
Since filing for bankruptcy in June 1998, Hawthorne, New York-based NextWave has tried to pay the government for the licenses but because the company did not initially pay on time, the FCC refused to accept payment and in 2001 tried to resell the licenses for a record $15.9 billion.
That auction was initially hailed as a big success because it raised a record amount but an appeals court said the FCC violated bankruptcy law and the FCC late last year let bidders withdraw since the agency had not provided the licenses.
NextWave has said it has deployed equipment to launch its network in the 95 markets where it has licenses, but one telecommunications analyst doubted the company's ability to begin service.
"This would mean NextWave would be the sixth, seventh or eighth competitor in a market where no one is making any money," said Rudy Baca, analyst at the Washington research firm Precursor Group. "I don't think they will get the backing they need."
In 2001, NextWave garnered $2.5 billion from banking giant UBS Warburg for building its network and lined up another $500 million in financing including $300 million in financing from Qualcomm Inc. (NasdaqNM:QCOM - News)
Companies that bid in the 2001 failed auction, including Verizon Wireless and Cingular Wireless, may not be so quick to enter partnerships with NextWave or offer much to acquire the licenses outright, another analyst said.
"Ironically, I think the landscape has changed somewhat from the operators being very eager to obtain the NextWave spectrum to being more cautious and targeting debt reduction and/or positive free cash flow," said Ben Abramovitz, wireless analyst at Jefferies & Co.
Verizon Wireless, the No. 1 wireless carrier and a joint venture of Verizon Communications and Vodafone Group Plc, declined to comment. Cingular, the No. 2 carrier and a joint venture of BellSouth Corp. (NYSE:BLS - News) and SBC Communications Inc. (NYSE:SBC - News), also declined comment. |
