Lucent Technologies Inc. has agreed to finance infrastructure equipment for NextWave Telecom Inc., in a deal the companies value at $200 million for the first two years.
Lucent will not receive an equity position for the investment. Payment terms will run for a number of years, in recognition of NextWave’s revenue structure, NextWave said.
Lucent has the option to supply up to an additional $800 million in infrastructure equipment as well. The equipment will be based on Code Division Multiple Access technology, and include Lucent switches and base stations.
The initial $200 million of equipment will be sufficient to build networks in New York City and Boston, said Raju Patel, NextWave’s senior vice president of network systems. The company estimates it will cost $2.5 billion to $3 billion to construct all networks in the first five years.
“We are not asking Lucent to do a turnkey installation because we have in-house engineering and other talent,” Patel said. “NextWave will be project manager, and in regions where it may be advantageous, we may work with construction firms,” Patel said.
“If a quality company like Lucent is willing to put these kind of dollars out, it shows that NextWave is a good bet,” he said.
NextWave Telecom’s subsidiary, NextWave Wireless Inc., is acting as the operating company and signed the contract with Lucent. NextWave said it has been testing a personal communications services system at the corporate headquarters of MCI Communications Corp. in Washington, D.C. MCI has agreed to resell NextWave airtime.
This is NextWave’s second significant equipment contract. Hughes Network Systems Inc. recently signed a supply agreement with NextWave to provide $50 million of equipment for a 3 percent equity position, with the option of providing $755 million in additional equipment during the next six years.
NextWave also has an equipment relationship with Qualcomm Inc. of San Diego. Another vendor announcement is expected soon, rumored to be LG Information and Communications Ltd.
NextWave was the highest bidder for 56 PCS licenses at auction earlier this year, and claimed another seven licenses at reauction. All licenses are contested and have not yet been granted.
The company’s license footprint is a scattering of market clusters-Los Angeles and San Diego; Las Cruces, N.M., and El Paso, Texas; Houston, San Antonio and Brownsville, Texas; Oklahoma City; Kansas City-Joplin, Mo.; a 10-market Indiana cluster; a six-market cluster in the Carolinas, Roanoke and Norfolk, Va.; a semi-contiguous group in Florida; Washington, D.C./Baltimore, Md.; Scranton and Allentown, Pa.; New York City and Albany, N.Y.; Boston and other parts of Massachusetts, bits of Connecticut, Rhode Island and Maine.
NextWave claimed a few more clusters at reauction: Seattle-Tacoma-Olympia-Centralia-Longview-Bellingham, Wash., and Portland, Ore; Denver; Minneapolis-St. Paul, Minn.
Altogether, NextWave’s markets cover 110 million pops. That’s nearly the pop strength of the nation’s heftiest A/B-block licensee, Sprint Spectrum L.P.
