NextWave warns of possible return to bankruptcy
Despite US spectrum shortage, it has failed to sell most of its huge base of licenses, which could come to market now
Published: 18 July, 2011
The rollercoaster history of NextWave Wireless may be coming to an end at last, with the firm saying that it has been unable to renegotiate the terms of its debt with lenders. That could force a filing for bankruptcy protection - and another interesting spectrum sale, hard on the heels of Dish Network's purchase of TerreStar's mobile satellite licenses, also from the bankruptcy process.
NextWave is remembered by many for buying $4.7bn worth of PCS licenses in 1996, failing to pay more than the $500m down payment, and haggling with the FCC for years, many of these from within Chapter XI bankruptcy protection. It emerged from that, sold most of its PCS assets to Verizon, but retained extensive holdings in 2.5GHz and 2.3GHz also acquired more in the AWS auctions. It then sought to build up a spectrum-to-equipment play in WiMAX with a series of acquisitions, including IPWireless and PacketVideo, but overstretched itself financially and sold off everything except most of the spectrum assets.
It has been trying to sell many of those but has had limited success, despite the much vaunted 'spectrum famine' in the US. Like Clearwire, which also cancelled plans to sell off some of its 2.5GHz licenses, NextWave may have come up against hostility to high frequency spectrum, which has challenges in terms of range and indoor penetration - though is often ideal for dense urban metrozones. In addition, the 2.3GHz band in the US is split in two, limiting capacity and raising interference issues.
Now its licenses could come up for sale at more attractive terms - according to a filing with the SEC on Monday, NextWave is considering bankruptcy. It wrote: "As previously disclosed, NextWave's cash reserves are not sufficient to meet these payment obligations." In the event of a default, "the holders of the secured notes could proceed against the assets pledged to collateralize these obligations, including all of NextWave's domestic wireless spectrum assets. These conditions raise substantial doubt about NextWave's ability to continue as a going concern. Inability to obtain a forbearance agreement, and ultimately a refinancing transaction or maturity extension, would significantly restrict the Company's ability to operate and could cause it to seek relief through a filing in the United States Bankruptcy Court."
Although operators may be unwilling to pay high prices for spectrum above 2GHz - which carriers higher roll-out costs for mobile broadband than the sub-1GHz bands everyone is chasing - this remains a strong base for a data network, as Clearwire shows. With mobile satellite bands currently perceived as high risk after the GPS interference issues that are dogging LightSquared, players who need more 4G capacity may look again at NextWave.