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

To: kech who wrote (875)	2/2/2003 12:48:31 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 1088

Barrons trashing NextWave : MONDAY, FEBRUARY 3, 2003 PLUGGED IN By MARK VEVERKA Spectrum Speculation PSSST. HEY BUDDY, wanna buy some wireless phone spectrum? Yet another chapter in the NextWave Telecom saga was written last week when the U.S. Supreme Court gave back billions of dollars worth of wireless frequencies to the would-be telecommunications company, ruling that the federal government cannot ignore its own bankruptcy laws. As you may recall, the Federal Communications Commission took back the spectrum from NextWave when it filed for bankruptcy in 1998. What's more, the FCC then re-auctioned the frequencies to a group of wireless carriers for about $16 billion -- back when the dot was still in dot.com. NextWave, in its successful initial bid five years earlier, had agreed to pay the FCC about $4.7 billion. Needless to say, the six-year imbroglio has kept the District of Columbia bar at full employment. Now, in the wake of the Supreme Court's ruling, the big question is: How much is the spectrum worth in today's sober economy? Despite the favorable ruling for NextWave, its shares have been slowly declining. Their price rose above 3 in anticipation of the Jan. 27 court ruling and have been in descent ever since, closing Friday at 1.90. Why? In a word: uncertainty. The FCC is NextWave's largest creditor, and it remains to be seen how much it plans to collect of a $1.4 billion interest payment on the original, $4.7 billion spectrum loan, explains Legg Mason telecom analyst Craig Mallitz. There is speculation that the FCC may not collect all or part of the interest payment. Or, at the very least, the FCC will give NextWave about 18 months to raise the cash -- about the same amount of time NextWave was without possession of the frequencies. But the key to placing a value on NextWave's shares is determining how much the spectrum is worth now. Nobody really knows the answer, but Mallitz was willing to take a crack at it. Using a recent Verizon spectrum transaction as a comparison, the analyst figures it's worth about $6.45 billion, or a $1.60 a share. That is about $2.48 billion less than what NextWave estimated in its own liquidity analysis for the bankruptcy judge. All told, after accounting for debt and other liabilities, Mallitz values NextWave's shares at a negative $1.72. By our calculation, that's less than worthless. To be sure, Mallitz admits to being conservative. There are myriad events that could increase the company's assets. Debt and interest could be forgiven, the company could win big damages from the FCC in court and, of course, a major telecom concern could yet again defy logic and pay a hefty premium to acquire the spectrum. The wishful thinking is, the two sides will sit down and negotiate a compromise settlement that would be lucrative for the FCC but still add net shareholder value to NextWave. If only investors could be so lucky. E-mail: mark.veverka@barrons.com Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved.