WASHINGTON-With the legal and regulatory actions behind them, creditors for bankrupt Geotek Communications Inc. now must decide what to do with a bundle of major-market specialized mobile radio licenses it planned to sell to Nextel Communications Inc. before a federal judge here ruled otherwise last month.
Six months ago, Wilmington Trust Co. (for Merrill Lynch Global Allocation Fund Inc. and S-C Rigg Investments III L.P.) and Hughes Network Systems-the largest Geotek creditors-were in line to receive most of the $150 million Nextel offered to pay for 191 900 MHz licenses auctioned by Geotek in late 1998.
Before filing for bankruptcy in 1996, Geotek-with its nationwide pool of 900 MHz SMR licenses-was regarded by many as the one SMR that might be able to compete head-on with Nextel.
Nextel, which offers dispatch, mobile telephony and messaging to more than 2.5 million customers, dominates the 800 MHz band.
But because Nextel failed to get a federal judge to lift a 1995 antitrust consent decree-which restricts Nextel from holding 900 MHz channels in 14 major markets-Nextel was unable to buy $131 million worth of the Geotek licenses.
Last month, however, U.S. District Judge Thomas Hogan approved a new Nextel-Justice settlement permitting Nextel to buy a limited number of 900 MHz licenses from Geotek and to acquire more licenses from others in medium-to-large size markets.
The Federal Communications Commission on Jan. 14, agreeing with Justice that a limited Geotek sale to Nextel did not pose antitrust problems and that 220 MHz and mobile phone carriers might offer competitive dispatch one day, approved the transfer of a portion of Geotek’s 900 MHz SMR licenses from its creditors to Nextel.
Mobex Communications Inc., a California-based SMR that ranks a distant second to Nextel with 50,000 subscribers, said last week it will seek reconsideration of the FCC ruling.
A variety of options are now presented to Geotek creditors, which hold scores of 900 MHz SMR licenses in big cities around the country. They could look for a new buyer. They could sue Nextel for terminating the agreement with Geotek. Or they could do neither and instead choose to negotiate a new deal with spectrum-hungry Nextel next fall.
“We’re not ruling out any options, including selling,” said Robert Drain, a New York lawyer representing S-C Rigg. “The market looks pretty good at this time,” he said, pointing to the more than $5 billion Nextel offered for bankrupt NextWave Telecom Inc.’s mobile phone licenses.
Drain said he has been approached by several firms interested in Geotek SMR licenses that Nextel had to forgo as a result of the new consent decree. He said Nextel was not one of the firms that has contacted him.
“We continue to remain interested in working with Geotek creditors for the consent decree markets,” said John Reardon, general counsel for Mobex.
It is unclear whether Nextel will pursue Geotek licenses in major markets after its consent decree ends Oct. 30. Nextel did not return calls for comment.
