REFUND OF NEXTWAVE AUCTION DEPOSITS TAKING LONGER THAN EXPECTED
FCC isn’t moving to return NextWave re-auction deposits as quickly as expected in new development that could tie up $3.1 billion in down payments for several more months, industry sources said. Commission now is said to be likely to return portion of down payments closer to time that U.S. Supreme Court makes decision on whether to grant FCC’s petition for review of U.S. Appeals Court, D.C., ruling that had overturned agency’s decision to cancel NextWave’s licenses for missed payment. NextWave’s opposition brief to Commission’s petition for certiorari is due Fri. at Supreme Court, which is expected to decide by spring whether to hear appeal, possibly by late Feb. or early March. Item on returning part of down payments had reached 8th floor at FCC and decision on return of at least most of deposits for Jan. 2001 re-auction winners had been expected as early as last week (CD Jan 25 p6).
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Apparent delay in refund of deposits raises questions about when carriers now will receive money, particularly if high court does decide to hear case. Industry observers have said if certiorari is granted, final decision on disposition of licenses might not come until first quarter of 2003, which would be more than 2 years after re-auction of NextWave licenses. Wireless carriers that won NextWave licenses in re-auction asked FCC earlier this month to refund $3.1 billion in down payments that agency has held without interest since Feb. 2000. As largest re-auction winner, Verizon Wireless has faced largest exposure of $1.7 billion, followed by Alaska Native Wireless, which has backing from AT&T Wireless, with $544.7 million and Salmon PCS, which has financing from Cingular Wireless, with $416.2 million. Return of deposits became more pressing issue for carriers when settlement on NextWave PCS licenses that would have kept Jan. 2001 re-auction results intact expired Dec. 31. In petition, 12 re-auction winners and Urban Communicators told FCC this month that “the time has come” for money to be refunded in face of indefinite future for potential settlement agreement.
“The FCC hasn’t spoken to us yet,” Verizon Pres. Ivan Seidenberg said Tues. in response to reporters’ questions about reports last week that the agency soon would return most of deposits. Verizon’s primary interest was “to get the money back on an auction that seems to not do what we wanted it to do,” he told reporters after his keynote that opened Comnet show in Washington (see separate story). Verizon Wireless is joint venture of Verizon and Vodafone. He said requested Supreme Court review of D.C. Circuit’s NextWave decision still was pending and Verizon was “still evaluating steps to take” on deposit return. Seidenberg declined to elaborate on what specific steps company was considering. He believes in long run, however, that “auction 35 is not valid anymore.”
Re-auction winners have told FCC they're losing $430,000 per day in interest on down payments, assuming conservative rate of 5%, and asked agency to act by Jan. 18, target that FCC didn’t meet. FCC Chmn. Powell told reporters after last Commission meeting that agency wouldn’t be held by that deadline (CD Jan 18 p6). He declined to speculate on timing, saying Commission “will make the right decision in the right amount of time.” FCC spokesman declined to comment on payments. Other re-auction winners seeking return of deposits include VoiceStream, with $73 million, Leap Wireless with $70 million, Cook Inlet with $82.5 million, SVC BidCo with $56.4 million.
Fundamental question in request for review of NextWave case centers on how bankruptcy law interacts with FCC’s spectrum policy and there are “broad considerations that would justify a government interest in appeal,” Schwab Washington Research analyst Paul Glenchur said. “It’s certainly easier to have the auction value still sitting out there,” he said of timing of refunding of deposits. Even if high court decides to take case, returning total amount of deposits to re-auction winners could undermine possibility for future settlement, Glenchur said. While odds are against Supreme Court agreeing to hear govt.’s appeal, decision would give all parties more time to reach settlement, he said.
Dan Pegg, senior vp of Leap, said he had received no formal notification from Commission that deposit return might take longer than expected, but said he wasn’t surprised. “I would hope that they could get the money back to us as quickly as is reasonably possible,” Pegg said. “Those of us that have the down payments knew that this litigation was possible and we were hopeful, based on all that we had heard, that we were on the brink of getting all but 3% [of bid price] back,” Pegg told us. While latest development isn’t what carriers had been anticipating, “I don’t think it’s an unreasonable position for them to take,” he said.