T-Mobile has filed a lawsuit in the U.S. District Court, Central District of California, against WCO Spectrum, alleging WCO has engaged in a criminal scheme to defraud, which has cost T-Mobile as much as $10 million.
For more than two years the parties have been locked in a battle over T-Mobile’s leases of 2.5 GHz spectrum.
T-Mobile inherited numerous 2.5 GHz spectrum leases when it purchased Sprint. These leases are mostly held by educational institutions around the U.S. But WCO has been approaching these schools, offering to purchase the leases. And T-Mobile has fought hard to prevent any sale of these leases from happening. It’s been very clear that T-Mobile does not want WCO as its spectrum “landlord” for these leases.
The 2.5 GHz spectrum is a vital part of T-Mobile’s spectrum layer cake for its nationwide 5G network.
While it’s been doing everything in its power to prevent WCO from purchasing any 2.5 GHz leases from schools, T-Mobile also participated in the FCC’s auction last summer of un-owned 2.5 GHz spectrum. And T-Mobile was able to purchase, and lock-down, most of the rest of available 2.5 GHz spectrum in the U.S.
Now, it’s going after WCO in regard to the spectrum that is owned by schools.
T-Mobile’s complaint says WCO and “its co-conspirators” have been making “sham offers” at exorbitantly high prices to purchase spectrum licenses. WCO knows that T-Mobile has a right of first refusal to purchases the licenses. And it’s banking on the fact that T-Mobile would purchase the licenses outright if necessary to avoid WCO owning the license. T-Mobile claims WCO’s offer to schools include a side deal, whereby WCO would receive a kickback in the likely event that T-Mobile exercised its right of first refusal and acquired the licenses.
T-Mobile also alleges that WCO doesn’t have the financial resources to purchase the spectrum at the amounts it’s been offering. “WCO’s proposed offers to EBS license holders, when totaled, amount to more than $1.6 billion and cover 167 spectrum licenses,” wrote T-Mobile. “Even if WCO intended to make good on any of its offers, WCO lacks the capacity to make good on anything remotely approaching all of these offers.”
T-Mobile’s complaint also attacks the character of WCO’s principal Gary Winnick, citing articles from 2002 in Fortune Magazine and New Times L.A., which referred to Winnick as “The Emperor of Greed” and the “Master of Disaster” in relation to the collapse of Global Crossing.
T-Mobile is asking the court to find that WCO violated the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, among other charges.
WCO’s side of the story
WCO didn’t immediately respond to a request for comment for this story. And we’ll probably have to wait for its official legal answer to T-Mobile’s complaint.
But an un-named source familiar with the matter provided Fierce Wireless with a little context on what WCO’s legal response might be.
He said WCO will probably try to show that it does indeed have financing in place and is prepared to buy the licenses at the prices it has offered. “Nothing forces T-Mobile to buy these licenses; they already have them under lease; and they can waive their right of first refusal,” said the source.
WCO has successfully purchased one license for $5 million after T-Mobile did waive its right of first refusal. That license was held by the Owasso Public School system in Tulsa, Oklahoma.
The source said WCO will also likely argue that the prices it has been offering for the spectrum licenses are not out of line in comparison to the prices that T-Mobile paid for 2.5 GHz spectrum in the FCC’s auction last summer.
In terms of T-Mobile’s claim that WCO arranged for kickbacks, the source said that WCO could characterize that as a “breakup fee.” WCO has done a lot of work to value the spectrum and negotiate with schools. And breakup fees are not unusual in contracts.