This was posted on Q thread.....
May 14 1999 10:49AM ET
Leap News--
Qualcomm spin-off awaits approval on
several market moves
By Denise Culver
The spin doctors at Leap Wireless
International say all systems are go for the
company's plan to establish itself as a
low-cost wireless service provider in
second-and third-tier U.S. markets. All that's
left is for the Federal Communications
Commission to rubber-stamp the deals leap
has made to secure licenses in about three
dozen markets.
But that approval has been slow in coming.
The FCC has yet to endorse any moves made
by Leap (www.leapwireless.com), including
the purchase of two personal
communications services spectrum licenses
made in October 1998, just weeks after Leap
was spun off as a separate company by
wireless equipment maker Qualcomm.
Although Leap was allowed to tender bids for
PCS licenses reauctioned last month by the
FCC (www.fcc.gov), regulators are still trying
to decide whether Leap was eligible to take
part in those auctions. Leap pulled down the
winning bids for 36 licenses in the auctions.
At issue in this unfolding drama is Leap's
claim that it qualifies as a " designated
entity" eligible to bid for certain spectrum
licenses, as defined by the FCC under the
Telecommunications Act of 1996. The intent
of the designated entity rule was to earmark
some wireless spectrum licenses for use only
by smaller competitors.
Designated entity status applies to
companies that have annual average gross
revenue of less than $40 million. But FCC
rules also state that gross revenue from
affiliate companies must be calculated into
that amount. The only exception is if the
company acquiring the license is a publicly
traded corporation with widely dispersed
voting power, with no single entity owning
more than 15 percent of the company.
It's here that objections are being raised by
the commission and several smaller wireless
competitors that have filed petitions and
comments on the issue. The big question is
whether Leap's previous connection to
Qualcomm (www.qualcomm.com) should be
factored into its eligibility. As part of the
spin-off, shareholders in Qualcomm were
awarded stock in Leap.
Complicating the FCC's ruling on Leap is the
involvement of the Small Business
Administration, which also has filed a petition
arguing that Leap does not qualify for
designated entity status. According to a
source inside the FCC, this marks the first
time that the Small Business Administration
has weighed in on this issue.
Dan Pegg, senior vice president of public
affairs at Leap, insists that the company
"clearly meets" the requirements for
designated entity status. Leap made
adjustments in its Qualcomm warrants to
ensure that the company would meet the
guidelines after the FCC first raised the
issue, Pegg says, adding that the company
expects to get FCC clearance within days.
But a further delay for review of Leap's
moves is more likely, the FCC source says.
"Leap wants those licenses because they
come with significant financial advantages,"
the FCC insider says. "They could go out and
get spectrum in another block, but they'd
have to pay more for it, which might not be
feasible given the parameters of their service
offering."
When or if Leap's status is approved, the
company plans to use the licenses to market
its newly formed subsidiary, Cricket
Communications. Cricket currently has about
4,900 subscribers and is operational only in
Chattanooga, Tenn., where Leap operates
the system through an agreement with
Chase Telecommunications.
Leap, which was staked to a 7 percent
ownership of Chase through the Qualcomm
spin-off, announced plans to buy out the
provider in January. The FCC has yet to
approve that deal.
At a Glance: A leap of faith
U.S. market moves by Leap Wireless
International are still awaiting regulatory
approval:
Chase Telecommunications Acquisition
In January, Leap announced plans to buy
Chase; Leap already owns 7 percent.
Spectrum license buys from Airgate Wireless
Leap announced plans to buy wireless
licenses covering the Carolinas in October
1998.
C-Block spectrum bids
Leap bid successfully for 36 personal
communications services (PCS) licenses in
last month's Federal Communications
Commission spectrum reauction, but its
qualification to participate is still under
review by the commission.
Full launch of Cricket Communications
In March, Chase relaunched its PCS service
in Tennessee under the Cricket banner, but
Leap cannot participate in directing that
initiative until it gets FCC approval on its
Chase buy.
|
