From the May 24, 1999, issue of Wireless Week
Uncertainties Remaining In NextWave Ruling's
Wake
By Monica Alleven
NextWave Telecom Inc.'s preliminary win in bankruptcy court could put the troubled C-Block licensee back into play. But so much remains unclear about the Chapter 11 filer that Wall Streeters are skeptical.
The U.S. Bankruptcy Court for the Southern District of New York on May 12 determined fair market value for the company's 63 licenses was $1 billion instead of $4.7 billion. The FCC had sought the latter figure and, although the commission wasn't commenting last week, many observers believe the FCC could still make it difficult for NextWave to move forward.
The final determination on what NextWave must pay the FCC won't be made
until another remedial hearing. Yet NextWave was clearly buoyed by the
May 12
decision, and some observers even applauded the company's tenacity in fighting the FCC.
A NextWave spokesman, who requested anonymity, said the company believes the court provided a market-based solution that will allow NextWave to reorganize and emerge from bankruptcy. It also paves the way for implementing its “carrier's carrier” strategy to resell a variety of wireless services.
But the Hawthorne, N.Y., company, which has not yet filed a reorganization plan with the bankruptcy court, might have to rethink its strategy. More than two years have passed since the January 1997 close of the original C-Block auction, and six or seven competitors already offer wireless services in some of its key cities.
Coming out of the blocks with another “me-too” service won't inspire too many investors.
“It's not as compelling as it was two or three years ago,” said John Bensche, analyst at Lehman Brothers in New York. However, a lot of the issues Wall Street had about NextWave revolved around the high price it bid for spectrum, and if that issue were resolved, “I think the door may open for them again,” he said. “Wall Street is always prepared to listen.”
Others agreed being late to market doesn't, in itself, put a company out of business. “I don't think it's too late for an operator to get into wireless, not only because of additional demands in wireless voice sales but also the huge potential growth of 3G and data and broadband,” said Kevin Roe, analyst at ABN/AMRO Inc. in New York.
NextWave inspired hope in 1996 when it signed a deal with MCI Communications Inc. calling for wireless reseller MCI to buy at least 10 billion minutes of airtime from NextWave over 10 years. Since then, MCI has emerged as MCI WorldCom Inc., and key executives who worked on the deal, such as former Vice President of Wireless Strategy Whitey Bluestein, have left MCI. An MCI spokesman last week said he did not know the current status of the NextWave agreement.
There's the possibility MCI WorldCom could be a white knight for NextWave, but that would mean building a network from scratch—a potentially undesirable alternative. However, starting from ground zero could allow for bypassing second-generation technologies altogether and going straight for third-generation services, analysts said.
Tight-lipped NextWave was not commenting on those or other possibilities, including a potential tie-in with fellow code division multiple access follower Leap Wireless International Inc. Both Leap, headed by Chairman and CEO Harvey White, and NextWave, led by Chairman, CEO and President Allen Salmasi, have ties to CDMA manufacturer Qualcomm Inc. White is a founder and former president at Qualcomm, while Salmasi was president of Qualcomm's wireless telecommunications division and chief strategic officer.
While a strategic alliance could change the outlook, several financial analysts said the jury is still out about the future of NextWave, whose credibility has suffered since its initial debut. Investors don't like uncertainties, and sticky legal and regulatory issues must be resolved before NextWave makes a comeback, analysts said.
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