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

To: Walter Liu who wrote (123)	6/20/1998 2:37:00 PM
From: Caxton Rhodes	Respond to of 1088

NextWave seeks bankruptcy protection \| Owes $4.2 billion for wireless phone licenses Deborah Solomon STAFF WRITER 09-Jun-1998 Tuesday NextWave Telecom Inc., the San Diego-based company that's been struggling to pay for its wireless phone licenses, said yesterday that it has filed for bankruptcy protection. The company, which owes the government $4.2 billion, had until yesterday to tell the Federal Communications Commission how it planned to pay for the 95 wireless licenses it bought at a government auction two years ago. It opted for Chapter 11 bankruptcy but also filed a complaint against the FCC, saying the company's financial problems were caused by the commission. In 1996, the FCC auctioned wireless frequencies for small, start-up companies that wanted to get into the cellular phone business. The auction raised $10 billion, but many of the companies have been unable to pay their bills. NextWave said the nine-month lag time between when the company bid on the personal communications services licenses and when they became available for use reduced their value. The company also said the delay interfered with its ability to raise financing. "The material delay caused by the inaction of the FCC completely frustrated the ability of (NextWave) to obtain the financing necessary to build out their PCS systems and to make the installment payments to the FCC on the acquired licenses," NextWave said in its bankruptcy filing. The complaint piggybacks on a ruling made on behalf of another wireless provider in April. Dallas-based General Wireless won licenses for about $1.1 billion in the 1996 auction but filed for Chapter 11 reorganization last October after it was unable to pay the $954 million it still owed the FCC. In April, federal bankruptcy Judge Steven Felsenthal issued a decision saying the licenses were worth only $166 million when they were issued in January 1997. Since General Wireless has already paid the FCC about $106 million, it now owes the government about $60 million, under the bankruptcy judge's ruling. The U.S. Justice Department appealed the court ruling yesterday, but NextWave said it's confident the decision will stand. NextWave is the third wireless bidder to file for bankruptcy protection. The announcement caps a tumultuous two years for the company, which was the biggest bidder for wireless licenses at the 1996 auction. NextWave and others bid stunning amounts of money at the auction. The company had planned to pay for the licenses with money it raised through an initial public offering, but Wall Street soured on wireless providers, and NextWave's IPO failed to raise enough cash. The company, which at one point had 700 employees, spent the next two years laying off workers and halting its wireless projects around the nation. Today it has about 100 employees, and James Madsen, NextWave's president, said the company plans to lay off more employees. He would not say how many people would be affected. The FCC had offered NextWave, and other cash-strapped wireless providers, four options to repay the debt. Bankruptcy was not one of the options. It also gave the license winners new debt-payment options and special financing terms, including installment payments. But NextWave and others needed still more help and in March, the FCC suspended the installment payments and gave the companies a choice. They could: Continue making installment payments on licenses won at auction. Return some or a portion of their licenses to be reauctioned. Their debt would be reduced accordingly. Use 70 percent of their initial down payments to the government to buy as many licenses as they can afford. Licenses they can't pay for would be returned to be reauctioned. Give back, without penalty, licenses they can't pay for to be reauctioned and surrender their deposits. NextWave opted for none of those, choosing instead to reorganize its assets and attempt to keep the licenses it won. The decision angered FCC Chairman William Kennard, who blasted NextWave in a statement yesterday. "NextWave's announcement underscores again the need for Congress to make clear that the licenses to use the public airwaves are public assets, not private property that can be tied up in bankruptcy," Kennard said. The FCC wants the licenses back so it can rebid them. Companies that file for bankruptcy, however, do not have to return the licenses while they organize their assets. Rick Kornfeld, one of the original founders of NextWave who left the company last year, said he's disappointed the company filed for bankruptcy. "I think the company's trying to do what's right for NextWave and its shareholders," Kornfeld said. "This has been a very rough time for the company, but there are good people there who, I think, are trying to do what's best for the company."