FiberTower misses interest payment, sees board member resignations

Wireless backhaul provider FiberTower announced that it has elected not to make a $1.3-million semi-annual interest payment on its Convertible Senior Secured Notes as it decides how to manage its debt load.

The company also announced the resignations of Chairman John Kelly and board members Phil Kelley and Randall Hack. FiberTower said the resignations weren't related to a disagreement on any matter relating to its operations, policies or practices of the company.

FiberTower said it determined that its network equipment and construction-in-progress were impaired because of continued early service terminations experienced in the most recent quarter and its decisions to limit investment in its legacy network. The company hasn't finalized it evaluation, but it estimates third-quarter 2011 asset-impairment charges at $150 million to $170 million.

Clearwire (NASDAQ:CLWR) has significantly slowed down its rollout of WiMAX as it searches for more funding and transitions to TD-LTE technology. Throughout the year, it has been terminating contracts with FiberTower. Earlier this year, CEO Kurt Van Wagenen said that the proposed merger of T-Mobile and AT&T (NYSE:T) also hurt the company's business since the two companies together represent about 63 percent of FiberTower's revenue. 

FiberTower has also seen increasing churn in TDM services as the wireless carriers accelerate their migration to Ethernet backhaul. "This accelerating TDM to Ethernet migration trend has intensified competition, and despite the fact that we are seeing incremental demand for TDM services on various sites, we are also experiencing increased TDM churn in some of our markets," Van Wagenen said during the company's first-quarter conference call earlier this year.

In regards to the missed interest payment this week, FiberTower said it expects to record a $158-million to $170-million third-quarter impairment charge on the carrying value of its FCC licenses. It said the early contract terminations indicate the "potential for changes in the company's FCC license spectrum can be favorably deployed. Accordingly, during the third quarter of 2011, FiberTower conducted an assessment of the fair value of its FCC licenses and concluded that the fair value of its FCC licenses was less than its carrying value."

FiberTower's inability to quantify the impairment charges is resulting in a delay of its third-quarter results filing. The company also received a Nasdaq noncompliance letter for failing to file its quarterly report and FiberTower has 60 calendar days to submit a plan to regain compliance.

For more:
- see this release
- see this Wall Street Journal article

Related articles:
FiberTower loses more of Clearwire's business
Clearwire sees record revenues, but losses mount thanks to write-offs
DragonWave cuts Clearwire strings with FiberTower microwave deal

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