Perhaps it is just as well that Allen Salmasi is still flying under the radar, given the tumult and upheaval that ensued when his last startup found it couldn’t repay the federal government the nearly $5 billion it owed for scores of mobile-phone licenses won at a Federal Communications Commission auction a decade ago.
Indeed, when RCR Wireless News named Salmasi “Person of the Year” in 2001, angry letters came in calling him reckless, a deadbeat and other unflattering names for dragging the U.S. government and wireless industry through tortuous litigation that lawyers profitably cherished. On the other hand, his former firm-NextWave Telecom Inc.-did, in fact, triumph against heavy odds in a landmark wireless Supreme Court decision in 2001. Salmasi sold most of NextWave’s remaining mobile-phone licenses to Verizon Wireless, and NextWave investors actually salvaged a handsome return in a somewhat ugly and unlikely miracle finish to the debacle.
“Most people would have given up at some point in time, and we kept going and going. So pretty much everyone is very happy,” said Salmasi in an exclusive interview last week.
To be sure, Salmasi was never really a bona fide member of The Club. He was largely regarded in the mobile-phone industry as an outsider, a desperado wading in unwelcome waters. Yes, NextWave Telecom flopped in as terrible and as spectacular fashion possibly imaginable. But Salmasi is not alone, standing shoulder to shoulder with other high-rolling risk-takers who also failed-but didn’t throw in the towel. It is the high-wire life cycle of entrepreneurs, the thin line between a sorry business disaster and a triumphant score that creates superstars adored by Wall Street, the media and business community.
Salmasi did not fade away as perhaps some might have wished. He could have, but he didn’t. The latest incarnation of his wireless vision-NextWave Wireless Inc.-is geared toward leveraging the potential of the emerging wireless broadband sector. NextWave, which became a public company earlier this year, is spending hundreds of millions on acquisitions, buying the building blocks-IP Wireless, GO Networks Inc. and PacketVideo Corp.-he sees critical to an ambitious Wireless 2.0 vision that Salmasi hopes will make the firm a global force as a supplier of products and network solutions to mobile handset manufacturers and WiMAX and Wi-Fi service providers.
The acquisition of companies and spectrum licenses has created losses at the front end, but Salmasi predicts several NextWave units will be cash positive within the next 12 months, if not sooner. At a minimum, there seems to be more of a “there” there than was the case with NextWave I.
Spectrum supply
NextWave also has large supply of spectrum in licenses and leases in the 2.3 GHz, 2.5 GHz and 1.7/2.1 GHz bands, with all of the company’s assets supported by a brain trust drawn from companies like Intel Corp., Nokia Inc., Motorola Inc., Texas Instruments Inc. and Qualcomm Inc. Salmasi used to be a former high-ranking executive at Qualcomm, which purchased the Omninet Corp. he founded in the 1980s.
Add it all up and the picture that begins to emerge is one of NextWave fashioning itself as a technology company that wants to be to wireless broadband what historically Intel has been to computers and Qualcomm has been to the mobile phones.
“In the long term, we’re going to be a chipset maker,” said Salmasi. “Everything that we have is built around our chip. . All of our acquisitions are aimed at ultimately bringing WiMAX to the market.”
The goal is to sell directly or indirectly to companies that have access to spectrum. But there’s a contingency plan; that’s where NextWave’s spectrum inventory comes in.
“Our idea there was that we develop a great chip and great network equipment with our software-defined radio, and we obviously have the software that goes with our chipset, which makes it a lot easier for the handset vendors to bring products to the market,” Salmasi said. “We have all those great things, but then if we don’t find the customer that has the spectrum to take advantage of all these technologies, then effectively we are not going to generate a lot of sales. So the idea was that acquiring the spectrum ahead of some of the other folks that would have ultimately been the buyers for the spectrum. Then, that gives us a way to effectively bring ourselves into a partnership, or into a deal that results in selling a lot of chipsets and products to that customer.”
In other words, NextWave already has licked the spectrum problem that Google Inc. and others seeking to capitalize in the wireless space are struggling with.
Gone is the carrier model or anything that resembles it. “We would effectively use our spectrum opportunity to create as much scale for our product as we possibly can,” Salmasi stated. Indeed, Salmasi, who views MVNO as a failed business model, is leaving wireless service to others. NextWave’s spectrum serves both as a hedge and as a powerful tool to leverage business deals with companies that may need spectrum here or there. It’s turnkey time!
Salmasi said NextWave is primed to do lots of future business with cellular heavyweights that backed the FCC in the NextWave I legal brawl. He sees AT&T Mobility, Verizon Wireless, Sprint Nextel Corp., wireless Internet service providers, competitive local exchange carriers and others as future customers. Some already are.
Salmasi, who has been doing road shows in recent months, said he believes institutional investors get it. Salmasi has declined to make growth and revenue projections, however he believes it is easy enough for investors to figure for themselves by developing models that track sales of NextWave’s business units. Salmasi said NextWave II has raised $1.2 billion to date.
Salmasi said he is not burdened with having to resurrect his image on Wall Street. He said institutional investors are very sophisticated and understand what he is trying to do.
Still, NextWave I was a trying experience for Salmasi. Was there any lesson in the messy ordeal?
“One take away is never question God. God works in mysterious ways,” Salmasi said with laugh. “We were saved in mysterious ways a number of times. So, frankly if you have your heart in the right place and you do all the right things ultimately you’ll have the right outcome.”
