BIDDERS DISCLOSE FINANCING ARRANGEMENTS FOR $17 BILLION AUCTION
Large carriers informed FCC and SEC of details of financial arrangements with designated entities in recent C-block re- auction, including $2.6 billion pledged by AT&T Wireless to Alaska Native Wireless (ANW). Cingular Wireless said it has planned $460 million in loans to designated entity Salmon PCS. FCC released public notice late Tues. (CD Feb 28 p5) on long forms filed by successful bidders in PCS auction that raised $17 billion. Relationships between major carriers and designated entities, which qualified to bid on licenses closed to smaller bidders in auction, have been subject of scrutiny by some smaller carriers.
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In SEC filing, AT&T Wireless said it had committed to provide $2.6 billion in various types of funding to designated entity Alaska Native Wireless, which had winning bid of $2.9 billion. AT&T Wireless said its financing for ANW was in exchange for “a combination of a noncontrolling equity interest and debt securities.” It has nearly 39% noncontrolling stake in Alaskan company. Other owners of ANW, which include Council Tree Alaska Native Wireless, have right to require AT&T Wireless to buy out their equity interests, SEC filing said. If that right were to be exercised 5 years after licenses are granted by FCC, price tag could be as high as $950 million, AT&T Wireless said, payable in cash or marketable securities, but if right were exercised sooner, price would be lower. FCC’s public notice started clock on 10-day period for parties to challenge auction results.
Long forms filed at FCC after auction provide more detailed financial information than short forms filed before auction. Alaska Native Wireless disclosed side agreement between AT&T Wireless and Council Tree Alaska Native Wireless that “they will explore the possibility of entering into other ventures.” It said possibilities included: (1) Joint participation in 700 MHz auction set for Sept. 12. (2) Acquisitions of additional wireless interests. (3) Provision of “telephony services to public sector clients” under federal programs that “may provide advantages” to Council Tree. (4) Promotion of telecom infrastructure on tribal lands. (5) Development of employee outreach programs for Alaska Native shareholder training. ANW also referred to PCS transfer rights agreement that AT&T Wireless and Dobson signed Feb. 8 that granted AT&T Wireless “a limited right of first offer with respect to transfers by Dobson of certain FCC licenses which Dobson may acquire.” Filings made by carriers to FCC outline direct management responsibilities held by designated entity officials and financing arrangements provided by large carrier partners. For example, Alaska Native Wireless filing indicates that Council Tree officials hold “day to-day” control with AT&T Wireless having “consent right” over certain actions.
Salmon PCS described arrangements for Cingular to lend it $238 million for down payment to FCC to participate in auction when eligibility forms were due last fall. Cingular has 85% noncontrolling interest in Salmon, which is run by wireless industry veteran George Crowley. Cingular disclosed it would lend Salmon 10% of cost to buy licenses, which would amount to $235 million of $2.35 billion that Salmon bid for 79 licenses. To pay for rest of spectrum, agreement calls for Salmon to try to arrange 3rd party financing on its own first. If that isn’t available, Cingular said it would arrange financing “on commercially reasonable terms” for rest of license costs after Salmon draws on required capital contribution fund. Crowley committed to make $50 million in capital contributions based on value of licenses that Salmon won. Crowley’s firm holds 15% equity stake in Salmon.
Cingular and Crowley also agreed not to sell beneficially owned assets of Salmon for 5-year period except under certain conditions. After 5 years, if management committee decides to sell all or part of Salmon, Cingular has right of first refusal to buy all or part of those properties at their “fair market value.”