NEW YORK — NextWave Telecom, buoyed by a court that restored the bankrupt wireless company's rights to valuable airwave licenses, has awarded a $100 million contract to Lucent Technologies to build a wireless network.
The plan calls for construction of a voice and data network in two cities and data-only wireless networks in the other 93 markets covered by the spectrum licenses that NextWave won in a 1996 government auction with bids totaling $4.87 billion.
The company's announcement came two weeks after a U.S. appeals court ruled that the Federal Communications Commission violated the bankruptcy code by re-auctioning most of NextWave's licenses in January for about $15.9 billion — or more than three times what the FCC was to have been paid by NextWave.
The FCC hasn't said whether it will appeal the ruling as expected.
Either way, doubts persist about the viability and eventual outcome of NextWave's efforts to win back the licenses, straighten out its debts, pay the FCC and build its own network.
Lucent, struggling with its own financial woes, said Tuesday it has already begun work on the contract, including network design and equipment production. Badly stung by granting credit to unproven players not unlike NextWave, Lucent also stressed that it will be paid with cash from a $200 million financing package that NextWave announced in mid-June.
"We have clearly begun work on this," said Mary Ward, a Lucent spokeswoman.
But while NextWave maintains its ultimate goal remains to compete as a new wireless carrier, many observers expect the company and the FCC to negotiate a settlement that would let them share a huge payday from the January auction.
The FCC says it took back the licenses because it wants to give people access to more spectrum to use as soon as possible, a goal that seemed easier to meet by selling them to established companies rather than leaving them in a bankrupt company's hands.
Before it filed for bankruptcy protection in June 1998, NextWave had made $504 million in required downpayments on its FCC licenses. In addition to a balance of $4.36 billion, due to be paid over 10 years, the company owes the FCC about $277 million a year in interest, or about $1.25 billion through June.
Some of the winning bidders in the January auction have suggested that the FCC has to appeal last week's court decision to preserve the integrity of its auctioning process.
Denny Strigl, chief executive officer of top bidder Verizon Wireless, remarked during a speech last week that a long delay in the handover of the NextWave licenses would depress their value, perhaps forcing Verizon to renegotiate the $8.78 billion it bid.
Likewise, in addition to ensuring the FCC won't lose out on a windfall from the January auction, a settlement with NextWave may be the quickest way to meet the agency's stated goal of putting the licenses to use.
The company reiterated Tuesday it is not seeking a settlement.
"We live in a cynical world," said Michael Wack, NextWave's deputy general counsel. "There's nothing more that we can do than tell people what our intentions are and act accordingly. Everything we have done before and everything we are doing today is evidence that we intend to do precisely what we say, which is to build out the NextWave network and operate it."