More than a year after receiving a favorable ruling from a Dallas bankruptcy judge, General Wireless Inc. still is crafting its business plan and searching for financing.
The company, which changed its name to Metro PCS in March, filed for Chapter 11 bankruptcy in 1997. A federal bankruptcy court last April revalued Metro PCS’s 14 C-block personal communications services licenses from $1.06 billion to $166 million, saying the value of the licenses declined substantially by the time the Federal Communications Commission granted them to Metro PCS.
NextWave Personal Communications Inc., another top bidder in the C-block auction, was granted a similar request in New York bankruptcy court. The court cut its bid obligation to $1.02 billion from $4.74 billion.
So far, Metro PCS has received a $300 million vendor-financing commitment from Lucent Technologies to build a Code Division Multiple Access network. The licensee has been combing the high-yield debt market for financing.
“We’ve been looking at the high-yield debt market, and what we’ve found is that while it has opened up from the middle to the latter part of last year, it seems to be more of a market where existing issuers have ready access but not new entrants, and especially new-time issuers,” said Dennis Spickler, vice president and chief financial officer with Metro PCS. “It hasn’t reached that depth at this point.”
Another overhang is that the FCC has appealed Metro PCS’s ruling, and a Texas court has yet to rule. Spickler said judges already have reviewed the merits of the commission’s appeal and ruled the FCC is not likely to succeed.
Spickler said Metro PCS plans to offer service similar to what Leap Wireless Inc. introduced in Chattanooga, Tenn., a flat-rate unlimited-calling service limited only to the metropolitan area.
“One of the fundamentals of existing competitors is that they made their beds and built out these large footprints,” said Spickler. “Our thought is that we can build a network more efficiently by keeping more people under the antenna patterns by limiting the geographic reach of the network … Our business plan is directed toward the consumer mass market.”
NextWave has been quiet about its buildout plans and strategy, but maintains it will pursue its resale strategy. Analysts believe the licensee also will have a difficult time raising financing in light of legal issues that will overhang the case. The FCC is likely to appeal the decision, though the commission will not comment on the case until a written opinion is issued.
