NORTH DALLAS - General Wireless Inc. has sought Chapter 11
bankruptcy protection in the wake of a lawsuit by a creditor,
documents show.
Last year, the Dallas company put 14 of its units - each of which
had a license to provide wireless phone service in one market - into
Chapter 11 in a bid to reorganize the company.
The full company went the same route late last month after Hyundai
Electronics America sued it over a $49.3 million loan a few weeks
earlier, documents say.
Hyundai's suit has been put on hold until the bankruptcy is
resolved, the documents indicate.
General Wireless is one of the troubled group of holders of
so-called "C-block" licenses to provide personal communications
services.
In 1996, a number of relatively small companies, including General
Wireless, bid a total of $10.2 billion for the licenses and the
right to compete with major wireless carriers like Sprint and AT&T
Wireless.
But the C-block holders "were too optimistic about the market
potential for PCS," said Hongjun Li, telecommunications analyst at
Parks Associates in Dallas. "As it turns out, it's expensive to
deploy PCS service in the first place, and there's too much
competition in the wireless sector."
And, while PCS phone service offers some features that analog
cellular doesn't - such as Caller ID and call waiting - some of
those advantages are being wiped out as the cellular carriers
convert to a digital format.
PCS providers argue that their signals are stronger and clearer,
making their calls less prone to fade-outs and service disruptions.
"But, do consumers know that?" Li asked. Most consumers can't
tell the difference between PCS and digital cellular, he said.
Meanwhile, capital markets for the C-block companies dried up, and
the firms soon were overwhelmed by the enormous costs they faced.
General Wireless raised hundreds of millions of dollars in
financing and venture capital, including a $300 million commitment
from Lucent Technologies for buying and building its network.
But even that wasn't enough to offset the $1.1 billion the company
had agreed to pay for its licenses.
According to published reports, the company sued the FCC in
federal court last November for allegedly overcharging it by more
than $753 million.
General Wireless said in the suit that its licenses were worth
less than $200 million, news reports say.
The suit alleged that, by the time the company bought the
licenses, the licenses had declined in value because of time
considerations, Wall Street's shrinking interest and the FCC's sale
of additional licenses for the same geographic areas.
The suit asked the court to re-state the value of the licenses,
news reports say.
A General Wireless official would not comment on the Hyundai or
FCC lawsuits, or on the company's bankruptcy filing. |
