AT&T to buy NextWave Wireless Inc for $600 mn

AT&T, the largest telephone carrier in the US, today said that it will buy the once-bankrupt NextWave Wireless Inc for around $600 million in cash, a move aimed at acquiring more airwaves for mobile internet services.

Under the deal, AT&T will pay around $25 million to shareholders of NextWave, plus a contingent payment of an additional $25 million, and later in a separate deal, it will pay NextWave's lenders $550 million to acquire the company, taking the total deal value to $600 million.

The deal does not include NextWave's entire spectrum. Some Canadian and US assets will be placed into a new holding company, to be owned by its creditors.

San Diego-based NextWave was spun out from Qualcomm Inc. in 1995, and a year later, acquired the rights to 95 spectrum licenses from the US government, for $4.74 billion.

But shortly thereafter NextWave filed for Chapter 11 and defaulted on its payments for the licenses. Although the company was under bankruptcy protection for nearly ten years, it successfully sued the US government for improperly seizing its assets while under bankruptcy.

The Supreme Court sided with NextWave and after emerging from bankruptcy in 2005, the company sold some of the licenses to Verizon Wireless, AT&T, and MetroPCS Communications and returned a few back to the US government.

It again acquired a few spectrum assets in a government auction in 2005 as well as from other companies for around $500 million.

In its latest regulatory filing, NextWave had said that the value of its spectrum holdings is $434 million and had debt of $1.1 billion.

Under the deal AT&T will get NextWave's licenses in the Wireless Communication Services (WCS) and Advanced Wireless Service (AWS) bands that cover 212 million people in the US.

The Dallas-based telecom giant is now hoping to get approval from the US Federal Communications Commission to use the new airwaves for mobile internet service in the next three years.

AT&T said that the WCS spectrum was first auctioned in 1997, but has not been utilised for mobile internet usage due to technical rules designed to avoid possible interference to satellite radio users in adjacent spectrum bands.

In June, AT&T and Sirius XM filed a joint proposal with the FCC, which would protect the adjacent satellite radio spectrum from interference and enable WCS spectrum for the first time to be used for mobile internet service.

AT&T said the proposed WCS rule changes and NextWave acquisition will represent an alternative approach to creating additional wireless network capacity to help support skyrocketing wireless data usage on smartphones and tablets.

If approved, the proposal will enable AT&T to begin initial deployment of WCS spectrum for added 4G LTE capacity, in approximately three years.