AT&T to buy NextWave, holder of unused spectrum

Aug 02, 2012, 4:25 PM EDT
The AT&T, Inc. logo is seen on on of the company's buildings in a San Antonio file photo from April 25, 2006. The Federal Communications Commission is putting off for a day its consideration of AT&T Inc.'s proposed takeover of BellSouth Corp., a mega-deal that some government officials want to examine more closely.
(AP Photo/Eric Gay, File)

NEW YORK (AP) — AT&T Inc. has agreed to buy NextWave Wireless Inc., a company that holds the right to use sections of the wireless spectrum that could be used for broadband.
AT&T said Thursday that it's paying up to $600 million in cash, most of which will go toward paying off NextWave debt. That also includes $25 million for the shares, plus an additional $25 million if certain conditions are met.
Shares NextWave jumped $1.05 to $1.31 per share in over-the-counter trading Thursday morning.
The deal could give AT&T more room on the airwaves for wireless broadband, but there are unresolved problems with some of NextWave's radio bands. They lie close to frequencies that are used for satellite communications, and interference concerns have prevented them from being used. AT&T has asked the Federal Communications Commission to approve a solution that it says would prevent interference.
The deal doesn't include all of NextWave's spectrum. Some Canadian and U.S. holdings will be placed into a new holding company, to be owned by its debtholders.
In its latest regulatory filing, NextWave listed the value of its spectrum holdings at $434 million and its debt at $1.1 billion.
AT&T has been on the hunt for more wireless spectrum, a hunt that led it to agree to buy T-Mobile USA last year for $39 billion. That deal fell through on antitrust grounds, however.
The acquisition of NextWave is also subject to review by regulators. AT&T said that if it goes through, it could be using the spectrum for wireless broadband in three years.
San Diego-based NextWave has had a difficult life. It was spun out from Qualcomm Inc. in 1995. The next year, it bid $4.74 billion to buy the rights to 95 spectrum licenses from the government, big enough to cover nearly 94 million people. But the company couldn't make its payments and filed for bankruptcy protection.
The FCC took back and re-auctioned the licenses, but NextWave argued that bankruptcy law protected it from seizure of its assets. It took the fight all the way to the Supreme Court, which sided with it. The company emerged from bankruptcy in 2005, a year after it reached a settlement with the FCC.
NextWave sold some of the licenses from the 1996 auction to Verizon Wireless, AT&T Inc., and MetroPCS Communications Inc. It returned others to the FCC.
NextWave's current spectrum holdings derive from another FCC auction in 2005 and from acquisitions from other companies. It spent $500 million on the license, it said in 2008. It was then also developing wireless network equipment, but those operations have folded or been sold off since then. The shares were delisted from the Nasdaq in 2010 because they failed to meet the minimum $1 value.