WASHINGTON-Nextel Communications Inc. came out of nowhere to win the auction of bankrupt WorldCom Inc.’s wireless assets with a $144 million bid, more than doubling the original offer by BellSouth Corp. two months ago.
The results of the auction, conducted over long hours on June 26 in the New York law offices of Weil, Gotshal & Manges L.L.P., were disclosed in a June 30 filing by WorldCom with the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.
Before the auction, industry insiders believed competition for WorldCom’s wireless assets would come largely from local and long-distance telephone companies that need wireless Internet solutions for rural areas. Nextel was not even mentioned as a possible bidder.
Nextel, according to sources, bested a formidable group of competitors that included BellSouth, Sprint Corp. and NextWave Telecom Inc. BellSouth, which offered $65 million for WorldCom’s wireless assets in May, is said to have been the first bidder to drop out, followed by NextWave and Sprint.
Nextel’s spectrum coup comes as its dogged campaign to obtain additional frequencies-10 megahertz at 2 GHz through a plan to remedy 800 MHz public-safety interference-appears to be losing ground. The Nextel plan faces stiff opposition from competing mobile-phone carriers.
A hearing is set for July 8, at which time U.S. Judge Arthur Gonzalez, who presides over the WorldCom bankruptcy, will consider final approval of Nextel as the winning bidder for WorldCom’s wireless properties. Parties with objections to Nextel’s successful bid were to have filed them with the court by last Thursday.
The transfer of WorldCom’s fixed-wireless licenses to Nextel is subject to approval by the Federal Communications Commission.
WorldCom will pay BellSouth a $1.43 million break-up fee and $520,000 in expenses.
“Nextel has always pursued valuable spectrum for tomorrow at affordable prices today to give the company maximum flexibility in the future,”said Audrey Schaeffer, a Nextel spokeswoman. Schaeffer bristled at the suggestion that Nextel is pursuing frequencies in the WorldCom bankruptcy auction and the 800 MHz rulemaking at the FCC because it has a weak spectrum position relative to other mobile-phone carriers.
“We are in a fine position when it comes to spectrum, and have plenty of room for growth,” said Schaeffer. In addition to the fixed-wireless licenses, which comprise about 200 megahertz and can be deployed for mobile communications under spectrum flexibility rules, Schaeffer said Nextel is acquiring 19 antenna sites and various tower leases.
WorldCom and Nextel are not strangers. Before succumbing to a $9 billion accounting scandal that has brought the Jackson, Miss., long-distance giant to its knees and put its lucrative government contracts in jeopardy, WorldCom in 1999 considered purchasing Nextel because it-unlike other top telecom carriers-lacked a major wireless play. WorldCom, however, ultimately decided not to buy Nextel.
“Nextel has always been one of the savviest buyers of disparate spectrum,” said Jim Wiesenberg, managing director of Carmichael & Co. L.L.C., a merchant banking firm with offices in New York and Phoenix.
Nextel became a national wireless powerhouse by combining slices of spectrum bought from dispatch radio operators around the country and building digital networks that enable the carrier to provide a mix of cellular, walkie-talkie and data messaging services.
Now other cellular operators, like Verizon Wireless, Sprint PCS and Alltel Corp., are scrambling to add push-to-speak features to their wireless networks.
“WCA welcomes Nextel into the industry and its efforts to unlock the value of spectrum going forward,” said Andrew Kreig, president of the Wireless Communications Association International.
WCA, which represents fixed-wireless firms, is lobbying to get the FCC to reconfigure 2 GHz frequency bands-originally allocated for wireless video service-to enable high-speed, broadband wireless Internet connections.
