NextWave staggers toward bankruptcy despite spectrum holdings

Spectrum holding company NextWave said it is negotiating with its creditors to restructure its debt, but might wind up in bankruptcy court despite owning hundreds of megahertz of mobile broadband spectrum.

The company said it received an extension until Aug. 1 to pay its debt obligations, and that it is trying to get a further extension. "As previously disclosed, NextWave's cash reserves are not sufficient to meet these payment obligations," the company said in a statement. "If the limited waiver expires in the absence of a comprehensive forbearance agreement, a refinancing transaction or a maturity extension, an event of default will arise" on its debt. If NextWave defaults, its creditors could look to seize its spectrum holdings, which the company pledged as collateral against its debt.

"These conditions raise substantial doubt about NextWave's ability to continue as a going concern. Inability to obtain a forbearance agreement, and ultimately a refinancing transaction or maturity extension, would significantly restrict the company's ability to operate and could cause it to seek relief" through a filing in bankruptcy court.

NextWave gained notoriety during the FCC's PCS auctions in the 1990s by bidding for spectrum it could not pay for. After years of court battles, the company finally sold much of its spectrum holdings to Verizon Wireless (NYSE:VZ) and others, and used the funds to parlay itself into an array of seemingly random businesses: WiMAX (via its acquisition of Cygnus), streaming multimedia (via its acquisition of PacketVideo), Wi-Fi (via its acquisition of Go Networks) and so forth. The company also invested in additional spectrum, including purchasing 154 AWS licenses for around $115 million during the FCC's 2006 auction.

However, during the past few years NextWave has gradually managed to offload much of its once-sprawling operations. The company in 2008 sold off a wide swath of its spectrum holdings to the likes of T-Mobile USA, MetroPCS (NYSE:PCS) and others; in 2009 it ditched IPWireless for $1 million; and in August 2010 NextWave sold its remaining stake in PacketVideo to DoCoMo for $111.6 million.

NextWave still has large holdings of AWS and WCS spectrum, which could be used for mobile broadband. In May 2010 the FCC voted unanimously to approve an order that changes rules governing the spectrum in the 2.3 GHz WCS band. The FCC said the spectrum can be made available for mobile broadband use, and mandated that rules be put in place to avoid interference issues.

At a time when wireless carriers are clamoring for more spectrum, NextWave's inability to offload or make use of its spectrum holdings would represent a setback for the FCC's efforts to unleash more wireless spectrum. 

For more:
- see this release
- see this GigaOM post

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