Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Rono who wrote (636)	1/13/2002 1:01:53 PM
From: kech	Read Replies (2) \| Respond to of 1088

Smart bankruptcy attorneys say 85%-90% chance of a Nextwave win in Supreme Court. Nice investment opinion in this weekend's barrons. Witmer: One last thing: There was a 13G [a regulatory filing denoting share ownership] filed by Gotham Partners, which is run by a very smart investor. My last pick is NextWave Telecom. The situation is very speculative. Samberg: NextWave? Oh, God! Q: Did you say something, Art? Witmer: This is a very interesting story. You could double or triple your money, or lose it all. NextWave was formed to bid on the C-block licenses for cellular spectrum that were put up for bid in 1996. NextWave won the bidding for 63 licenses, costing $4.7 billion. In March of '97 it made a timely down-payment of $474 million, and signed a promissory note with the government for the balance. Then the company hired 600 people, opened 22 offices, secured $2 billion in vendor financing, signed 300 leases. It did everything it could do to get its business up and running. But after the C-Block auction, and before the granting of the C-block licenses, the FCC flooded the market with the D, E and F blocks of spectrum. To make a long story not so long, NextWave had trouble meeting an interest payment due on its promissory note to the government because it couldn't raise any capital. It filed for bankruptcy protection, and has sort of muddled around in bankruptcy court. The court ruled against the lowering their payment. Then the value of the C-block licenses rebounded. When that happened NextWave secured financing to pay the government all the monies owed immediately. And it filed a plan of reorganization. On January 12, 2000, nine days before this plan was confirmed, the FCC claimed the licenses were canceled and put them up for re-auction. In the re-auction they fetched about $16 billion. Next Wave sued and won, the FCC appealed, NextWave won, and the FCC filed an appeal to the Supreme Court, which has not yet decided whether to take the case. Q: This is a long story. Witmer: While this was happening, Michael Powell, the new head of the FCC, started negotiating with Verizon and others that had bid on the spectrum to cut a deal giving the government something. They came up with a deal for the licenses in which NextWave would get $6 billion and the government would get $10 billion. The deal would value NextWave at about $13 to $15 a share, compared with about $7.50 right now. But the deal did not go through, because Senator Hollings (D.-S.C) essentially said, 'You didn't ask me.' [Thursday Verizon, the leading player in the settlement talks, withdrew form the negotiations.] If the Supreme Court does not take this case, or if they take it and rule against the FCC, NextWave will get the licenses for $4.74 billion. The government will get nothing. NextWave will have licenses worth $17 billion, bringing the value of its shares to about $25 or $30 apiece. Q: The market doesn't think it's so open and shut. Witmer: The smartest bankruptcy-law people I know think it is about an 85% to 90% chance that NextWave wins. To recap, if the Supreme Court rules against them, you get zero. If the deal gets re-cut and goes through Congress, you probably get your $12 or $13 a share. And if Next Wave wins, you get well north of $20 a share. The stock is about $7.

To: Rono who wrote (636)	1/16/2002 5:44:11 PM
From: Rono	Read Replies (1) \| Respond to of 1088

JANUARY 16, 2002 NEWS ANALYSIS NextWave Misses Another One Congress won't let the bankrupt wireless carrier reap $16 billion for its spectrum licenses, sending the would-be buyers scrambling It had the makings of a major coup. In November, bankrupt startup NextWave Telecom (NXLC ) signed an agreement to sell wireless licenses it had won at a government auction to Verizon Wireless, AT&T Wireless, and others for $16 billion. After the government took its share, NextWave investors were to split $6 billion. Founder Allen B. Salmasi, who started the company seven years ago with just $5 million, would have walked away with at least $396 million. It was quite a reversal of fortune for a company that had been in bankruptcy court since 1998, having defaulted on $4.2 billion in fees and back taxes it owed the government for the licenses. Too bad NextWave's fortunes were reversed once more. First, Congress balked at signing off on the agreement, blowing through the Dec. 31 deadline to enact a law approving the deal. Some legislators were furious that a bankrupt company that had defaulted on its debts to the government was going to get a rich payday. "I'm going to fight till the end," Senator Ernest F. Hollings (D-S.C.) vowed on Dec. 6. Then on Jan. 10, Verizon Wireless (VZ ), which had planned to buy $8 billion worth of NextWave's licenses, bailed out of the deal. The company lost patience because it was losing $1.5 million a week on the $1.7 billion deposit it had paid to the Federal Communications Commission. BANDWIDTH HUNTING. Now the deal's collapse is certain to reverberate throughout the wireless industry. For starters, it will take longer for Verizon, Cingular, and others to get their hands on the spectrum they sorely need so their networks can carry more voice and data traffic. One possibility is that wireless players will hunt for acquisitions. Verizon may make a run at Nextel (NXTL ), Alltel (AT ), or even Sprint's (PCS ) wireless business. "Everything's on our radar screen," says one senior Verizon executive. AT&T Wireless (AWE ) may also make a bid for Nextel. Such acquisitions could help solve the spectrum shortage, but they could take a year or more to complete, which may not be a huge problem since demand is flat. NextWave's investors are the big losers. Even if they can put together some new deal, it won't be worth anything like the $16 billion Verizon Wireless, Cingular, and others were ready to pay last year. "When these companies agreed [to that price], it was a different world, and they bid more than they want to pay now," says analyst Chris Larsen of Prudential Securities. WHATEVER IT TAKES Absent a deal to sell its licenses, NextWave has no choice but to gamely promise to build a business that few think can succeed. The company plans to spend $3 billion on a network offering high-speed mobile Internet access and voice service in 95 markets around the country. "We have $100 million devoted to the initial build-out. We will use all of that and whatever more it takes," says NextWave Deputy General Counsel Michael Wack. It may be folly. It's unclear how NextWave will raise the additional money it needs to construct its network, let alone settle its $4.2 billion debt to the government. Today, it has just $100 million in the bank. NextWave had commitments for $5 billion in debt and equity -- half from UBS Warburg and half from other investors. But that was contingent upon NextWave having clear title to the licenses. In October, the FCC threw the company's ownership into question when it filed an appeal with the Supreme Court, challenging a lower court ruling that the agency illegally seized the spectrum from NextWave in 2000. SEVEN IS A STRETCH. Even if NextWave somehow manages to build its network, its troubles will continue. The U.S. already has six national wireless carriers, and competition is so fierce that Verizon Wireless is the only one making money. What's more, all are upgrading their networks to provide the same kind of data services NextWave promises. "Give me a break," says analyst Blair Levin of Legg Mason and a former FCC staffer. "No one believes they can exist as the seventh national provider." One way or another, it looks like the nation's wireless players will get their hands on the spectrum they need to upgrade their networks for fast Internet access. Unfortunately, the collapse of the NextWave deal means that the process will drag on longer than expected. As for NextWave, it shouldn't count on yet another reversal of fortune. businessweek.com