NextWave gets $2.5 billion financing to build network

UBS Warburg LLC, a global financial institution, Tuesday announced plans to provide NextWave Telecom with $2.5 billion in debt financing to help the bankrupt carrier build a network for offering 3G wireless services in the U.S.

The funds will also be used to implement a company-wide reorganization, plans for which were filed with a New York bankruptcy court on Aug. 6, NextWave officials said. A decision is pending from the court. UBS Warburg has been hired as NextWave's financial advisor and will aid in implementing the reorganization, if approved, officials said.

Tuesday's announcement follows news of Qualcomm's $300 million investment in NextWave last week. (See: NextWave gets $300 million from Qualcomm)

The wireless company, which claimed bankruptcy in 1998, is scurrying to gather the $5 billion it needs to build its digital wireless network, which will be based on Qualcomm's Code Division Multiple Access technology.

NextWave is currently involved in a tug-of-war with the Federal Communications Commission over the spectrum that this wireless network would occupy. The company bid $4.74 billion for spectrum licenses in 1996, but defaulted on its payments. The FCC had concluded that NextWave's licenses were immediately canceled following the first missed payment, and earlier this year re-auctioned the spectrum to a number of wireless carriers including Verizon Wireless and affiliate companies of Cingular Wireless and AT&T Wireless Group.

NextWave maintained that bankruptcy laws protected it from ramifications for missed payments, and therefore still owns the spectrum. In June, the U.S. Court of Appeals for the District of Columbia ruled that the FCC violated U.S. Bankruptcy Code in canceling NextWave's licenses. The FCC has since said it will appeal that decision to the U.S. Supreme Court.

The fact that NextWave is pursuing funding for its network lends credibility to its claims that it is serious about competing in the crowded U.S. wireless market. It has been speculated that the company is merely interested in arriving at a cash settlement with the FCC, or in obtaining the disputed spectrum licenses so that it can resell them to other wireless carriers. However, last month a group of carriers who had bid on the spectrum earlier this year proposed to buy the licenses from NextWave - an offer to which the company did not respond.

UBS Warburg, a division of UBS AG in Zurich, can be found at http://www.ubswarburg.com/. NextWave Telecom, in Hawthorne, N.Y., can be reached at http://www.nextwavetel.com/.

The IDG News Service is a Network World affiliate.

FCC to send NextWave spectrum case to the Supreme Court
The Industry Standard, 08/07/01.