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Technology Stocks : Nextwave Telecom Inc. -- Ignore unavailable to you. Want to Upgrade?

To: gdichaz who wrote (372)	6/23/2001 3:21:36 PM
From: Dennis Roth	Read Replies (1) \| Respond to of 1088

"The tragedy here is that by welshing on its promise to pay the U.S. government, NextWave could walk away with billions," William E. Kennard The Washington Post's spin on the story. Kennard's remark won't go unnoticed, but his actions in this affair won't be criticized in the Post. - DPR Judges Overturn Airwave Auction Ruling on $15 Billion Sale Stalls Wireless Firms By Christopher Stern Washington Post Staff Writer Saturday, June 23, 2001; Page E01 washingtonpost.com A federal appeals court yesterday upset plans to expand mobile phone services in cities across the United States after it ruled the government improperly seized and resold more than 200 licenses for wireless spectrum belonging to an insolvent company. The decision by the U.S. Court of Appeals for the District of Columbia casts doubt on whether the Treasury will ever see the more than $15 billion in fees generated by January's federally run auction of the spectrum rights. Many of the nation's largest telecommunications companies competed in the bidding in hopes of filling holes in their networks, and to keep up with the exploding demand for mobile telephones and wireless Internet connections. Instead, the appeals court ruled the licenses should be returned to NextWave Telecom Inc., which bid $4.7 billion for them five years ago but defaulted on the payments. The Federal Communications Commission had argued that since the company could not make good on its down payments, the agency had the right to resell the frequencies at auction. Verizon Wireless Inc. and 20 other companies quickly snapped up the rights to augment their service in booming markets such as New York, Cleveland, San Diego and Los Angeles. "The tragedy here is that by welshing on its promise to pay the U.S. government, NextWave could walk away with billions," based on the value of the rights, said former FCC chairman William E. Kennard, who pushed for the January auction before leaving the agency. The court's ruling that the auction should have never taken place may also reverberate through Congress, which was counting on the revenue to help balance the budget, said Thomas Hazlett of the American Enterprise Institute. Congressional budget committees now may be forced to scramble to make up the more than $15 billion. "They are going to have a hole to fill, I know that," Hazlett said. Officials of Hawthorne, N.Y.-based NextWave said the court decision should bolster the company's value in the eyes of investors and finally enable it to fashion its long-planned telecommunications network. "We are interested in keeping the licenses and building [the network] out," said Michael Wack, the company's deputy general counsel. FCC officials said yesterday that they were still reviewing the decision and were not prepared to comment on it. If it chooses, the agency could appeal the decision to the Supreme Court. Meanwhile, some of the companies that purchased NextWave's licenses at auction urged the FCC to try to reach a settlement with the carrier that would allow the successful bidders to keep the rights. "The issue is getting the [spectrum] into the hands of companies that already have networks and know how to use it," said Verizon Wireless spokesman Jeffrey Nelson. His company bid $8.7 billion during the auction, $5 billion of which was for rights to expand its transmission capability in New York. In its ruling, the appeals court found that the U.S. Bankruptcy Code, which protects assets of insolvent companies, trumped the FCC's rules, which required bidders to make down payments or give up their airwave licenses. The FCC argued it could reclaim the licenses because NextWave failed to pay the necessary fees. But the court said the rights amounted to a debt covered under bankruptcy law. The FCC cannot cancel "the licenses of winning bidders who fail to make timely installment payments while in Chapter 11," the court wrote. Rudy Baca, an analyst with the Precursor Group, a Washington-based research firm, predicted a settlement would be worked out and NextWave would reap a huge profit. "Now they get their going-away money," Baca said.