AT&T to buy NextWave for its 4G spectrum

NextWave has been trying to offload its licences, in the AWS, 2.5GHz and WCS (2.3GHz) bands, for four years, since an ambitious plan to build an equipment-to-spectrum business around WiMAX foundered. Now, as AT&T and Verizon engage in an escalating battle to secure 4G capacity, the former is to pay $25m for the company, as well as an additional contingent fee of $25m and the assumption of debt, making the total cost $600m.

NextWave came close to a second stint in Chapter XI bankruptcy protection last year as it struggled to sell the licences, its only remaining major assets. It had previously bought firms like PacketVideo, GO Networks and IPWireless to support its mobile broadband vision, but was forced to sell them on again as it overstretched itself.

That was only the latest of its adventures under maverick CEO Allen Salmasi. NextWave is remembered by many for being spun out of Qualcomm and then 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 from within Chapter XI. Although the regulator reclaimed the licences, NextWave secured a court order to reclaim them, and sold most of its PCS assets itself, largely to Verizon. However, it retained extensive holdings in 2.5GHz and 2.3GHz and also acquired more in the AWS auctions.

Most of these assets will now go to AT&T, which has also been snapping up 700MHz licences from rural cellcos and possibly from Verizon after the failure of its masterplan to acquire T-Mobile USA last year. However, the company is ending up with a motley patchwork of frequencies. Its initial LTE roll-out is in 700MHz A and B Block, with the added twist of using supplemental downlink techniques to add the TDD 700MHz spectrum acquired from Qualcomm.

It will eventually refarm PCS, but also has some holdings in AWS. These will be boosted by the NextWave purchase, though will not rival those of Verizon Wireless, if it manages to acquire AWS licences from four cablecos and Leap. If that deal is approved, it will make Verizon the largest AWS owner, though it will also undergo a spectrum swap with TMo in the band, enhancing the latter's position too (TMo also gained significant AWS holdings as part of its break-up fee after the failure of the AT&T takeover).

Just to make the picture more complicated, AT&T is also the major holder of WCS frequencies, which would also be expanded by the NextWave agreement. This has generally been considered sub-optimal spectrum for cellcos as the band is split down the middle by the satellite radio holdings of Sirius XM, causing interference concerns. However, AT&T and Sirius XM recently filed a joint proposal with the FCC to rearrange the airwaves, in effect establishing guard bands to protect the radio services. The main player to be disadvantaged by that plan would have been NextWave, much of whose WCS spectrum sits in those designated guard areas.

The Nextwave acquisition still needs to be approved by regulators, and AT&T believes it will close by the end of the year.