Legal Challenge to AWS Auction Cited as Risk by MetroPCS
MetroPCS cited a suit by designated entities as a risk factor in filing last week for an IPO at the SEC. The DEs want the 3rd U.S. Appeals Court, Philadelphia, to overturn the 2006 advanced wireless services auction. The regional carrier filed for a $1.1 billion IPO; it will use the money to enter markets in which it won AWS licenses, it said. The auction saw MetroPCS bid nearly $1.4 billion for 8 licenses, making it a surprise among the top bidders.
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Council Tree, Bethel Native Corp. and the Minority Media & Telecom Council sued the FCC, challenging the auction’s revised DE rules and claiming that the FCC at the last minute “dramatically altered the regulatory landscape.” The court hasn’t set a date for oral arguments in the case.
“The appeal challenges the DE Order on both substantive and procedural grounds,” the MetroPCS SEC filing said: “Among other claims, the petitions contest the FCC’s effort to apply the revised rules to applications for the AWS Auction 66 and seeks to overturn the results of Auction 66.” MetroPCS can’t predict the outcome, it said.
MetroPCS has 2.6 million subscribers, marking a 50% growth rate in one year, with services in 7 of the 25 largest U.S. markets, it said. The company earned $70.6 million the first 9 months of last year, compared to 2005’s net income of $179.8 million. MetroPCS filed for an IPO 3 years ago but withdrew its application.
MetroPCS cited other regulatory and business risks, such as increased competition from cable consortium SpectrumCo and other winners of AWS auction licenses.
A 700 MHz auction, expected later this year, and a 2nd AWS auction could sap the value of the spectrum it bought last year, MetroPCS said. “There are a series of risks associated with any new allocation of broadband spectrum by the FCC,” the company said: “First, there is no assurance that the spectrum made available by the FCC will be appropriate for or complementary to our business plan and system requirements. Second, depending upon the quantity, nature and cost of the new spectrum, it is possible that we will not be granted any of the new spectrum and, therefore, we may have difficulty in providing new services. This could adversely affect the valuation of the licenses we already hold. Third, we may be unable to purchase additional spectrum or the prices paid for such spectrum may negatively affect our ability to be competitive in the market.”