URBAN COMMUNICATORS ASKS FCC TO REINSTATE ITS PCS LICENSES

Urban Comm had bid $90 million for its PCS licenses, then filed for bankruptcy, with the FCC cancelling its licenses after it missed a payment. Also like NextWave, Urban Comm has a bankruptcy case pending in U.S. Bankruptcy Court, White Plains, N.Y., that had been put on hold pending the outcome of the regulatory and legal disputes over NextWave’s licenses because similar issues were raised in both cases. Urban Comm was formed by several members of the National Assn. of Black Owned Bcstrs. and bid on PCS licenses, including C-block spectrum in N.C. It had asked the FCC in Aug. 2001 to reinstate its licenses and said in a filing late last week that it wanted the licenses reinstated -- as NextWave’s have been -- and would like certain deadlines involving them to be tolled. Urban Comm said the U.S. attorney in Manhattan had informed the bankruptcy court that the FCC planned to return the company’s licenses, although that hadn’t happened yet.

“The history of Urban Comm has been a long and difficult saga,” it said. “Throughout this process, Urban Comm has been in the shadow of NextWave, and has never been accorded any independent consideration of its plight.” It said the FCC had taken the position that its licenses were cancelled automatically Oct. 30, 1998, when the company failed to make an interest payment. Since then, it said the Commission had treated it as a company without licenses. As a result, Urban Comm argued that the clock on deadlines and obligations related to those licenses should be stopped from that date until the FCC reinstated the licenses. It said its request for tolling relief would cover its build-out obligations, interest accrual period, license installment payment schedule and license term.

“Additionally, the Commission should adjust the interest rates charged for the revised installment payment period to reflect the significantly lower rates which would be applied if the licenses were granted today,” Urban Comm said. “Urban Comm has lost significant market opportunities due to the Commission’s wrongful termination of the licenses, including the ability to refinance its installment debt to the Commission at current lower market interest rates.” A downward adjustment of the interest rates on this debt would be “reasonable and equitable,” the company said. “Due to the unauthorized cancellation of the licenses, Urban Comm is essentially receiving its licenses today in the position of a new licensee.” The current interest rates that apply to the license debt were established by the FCC after the C- and F- block auctions ended in 1996 and 1997 and reflected market conditions at that time. “Now, more than 6 years later, financial markets have changed dramatically,” Urban Comm said. “Interest rates have fallen sharply. Application of the interest rates adopted in 1996 and 1997 would be onerous and inequitable in today’s financial markets.”

The question of whether interest rates of the earlier debt should be adjusted to reflect current financial conditions reportedly has been at issue in discussions between NextWave and the govt. over the form of the carrier’s payment. Under original FCC rules, NextWave had until 2007 - - 10 years -- to pay off its auction debts and didn’t have to start paying principle until the 7th year. The company already has paid $500 million of the roughly $5.8 billion it owes to the govt., including past estimates of interest payments. So one apparent question has been what would happen to the size of that payment if NextWave were to pay what it owed in a lump sum, or otherwise restructure its debt, the idea being that that would reduce the amount of interest payments that otherwise would have stretched out over the time of its installment payment plan, several sources said. Another question has been whether the interest rate should be adjusted similarly to what Urban Comm is seeking. One source said that because the original PCS installment payment debt was tied to 10-year U.S. Treasury notes, that could reduce the prevailing interest rate from a range of roughly 7-8% to closer to 4-5% based on current financial conditions. While in the commercial world such debt obligations typically can’t be restructured when interest rates change, several sources said situations involving NextWave and similarly situated licensees were unique, in part because they didn’t hold the licenses until the Supreme Court ruled in Jan. Other factors in the case include the extent to which the bankruptcy court is likely to be amenable to such arguments, several sources said.

Resolution of payment issues on NextWave’s licenses is seen as a key to a reported deal in which Cingular Wireless would acquire 20% of NextWave’s PCS licenses in an action valued earlier this year at close to $1.4 billion. One source said a strong possibility was that whatever agreement terms were reached on the Cingular licenses would be structured in a way that they could be applied to NextWave’s other licenses. A NextWave spokesman wasn’t available for comment Tues. NextWave shares were up 6.5% Tues. in over- the-counter trading to $2.62.