Companies make offer to settle spectrum dispute

Seven major wireless companies have offered to pay NextWave Telecom Inc. as much as US$5 billion for its wireless licenses in a gamble to retain control of nationwide spectrum for which they bid more than $15 billion in January.

Hawthorne, New York-based NextWave originally won the licenses in a 1997 Federal Communications Commission auction with a bid of $4.7 billion but failed to make full payment after seeking bankruptcy protection in 1998. After a protracted legal battle, the FCC said it had won the right to reauction the licenses this January, even though NextWave still had a case pending in the U.S. Court of Appeals in Washington.

The FCC reauctioned the NextWave licenses for a total of $17 billion in a field of spectrum-hungry carriers ready to use the licenses to augment existing networks. In early June, the appeals court ruled that the FCC violated bankruptcy laws by repossessing the licenses and ordered their return to NextWave.

NextWave quickly placed an order for more than $100 million of equipment and announced plans to build out a nationwide carrier, which would sell wholesale airtime to other carriers.

Still eager for the NextWave spectrum, the companies that had won major chunks of nationwide spectrum in the January auction on Tuesday proposed a settlement that would pay NextWave up to $5 billion for its spectrum and free it up for their use. The group includes Fairbanks, Alaska-based Alaska Native Wireless LLC, which partnered in the auction with Redmond, Washington-based AT&T Wireless; Oklahoma City-based Dobson Communications Corp.; Chevy Chase, Maryland-based Salmon PCS LLC, which partnered with Atlanta-based Cingular Wireless; Bedminster, New Jersey-based Verizon Wireless; and Bellevue, Washington-based VoiceStream Wireless Corp.

The companies, in a letter to FCC Chairman Michael Powell that was publicly disclosed yesterday, proposed that they collectively pay NextWave between $4 billion and $5 billion out of the total of the $15 billion they had bid at the FCC auction. This would then leave between $10 billion and $11 billion that the carriers would pay to the FCC.

In their letter, the companies said there are no legal impediments to such a deal, citing the Debt Collection Improvement Act of 1996, which allows federal agencies to compromise and settle claims.

Neither the FCC nor NextWave publicly commented or replied to the settlement offer by deadline.

Industry analysts and observers were divided on whether NextWave will settle for the $5 billion.

Craig Mathias, an analyst at Farpoint Group Inc. in Ashland, Massachusetts said that if the carriers want a quick resolution of the matter, they would have to ante up more cash. "Why should NextWave settle for $5 billion?" he said "They're sitting on an asset worth $17 billion. If a settlement does happen, it will be a figure somewhere between $5 billion and $17 billion."

John Nakahata, a Washington-based communications lawyer who served as a senior adviser to former FCC Chairman William Kennard, said he was optimistic that sooner or later, NextWave will settle for the very practical reason "that building out a wireless network is no small task. [A settlement] would allow [NextWave] investors to walk away with a good return," without having to build and operate a wireless network, he added.

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More about AshlandAT&TAT&T WirelessCingular WirelessDobson CommunicationsFarpoint GroupFCCFederal Communications CommissionNextWave TelecomSalmon PCSVerizonVerizon WirelessVoiceStream Wireless

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