Yesterday, wireless carrier AT&T announced that it reached a deal to acquire NextWave Wireless. NextWave Wireless controls a large portion of the Wireless Communications Spectrum (WCS) in the U.S. The sale will afford AT&T the ability to use the WCS spectrum they purchased in 1997.
In 1997, AT&T purchased WCS spectrum with the intent to use the WCS for cellular transmission. But A&T’s spectrum was rendered useless by government rules which were developed to avoid interference with adjacent satellite radio spectrum bands. The rules arose out of concern centered around whether the satellite radio bands could be knocked out by cellular transmission. This unfortunate situation has rendered AT&T’s WCS spectrum virtually worthless for their cellular business.
Fast forward to June 2012, and AT&T reached an agreement with Sirius/XM satellite radio, which led to both companies filling a joint proposal with the Federal Communications Commission (FCC). Unfortunately for AT&T, the proposal still created an issue for the wireless carrier. The joint plan creates a buffer on either side of Sirius/XM’s spectrum. The buffer would cover the C and D blocks, taking both out of commission. AT&T’s purchase of NextWave Wireless will provide the carrier with the ability to use spectrum it already owns for 4G service.
Included in the sale, is NextWave Wirelesses’ Advanced Wireless Services (AWS) licenses, which cover and estimated 60 million people. These customers reside in smaller markets. The AWS licensces are a nice addition for AT&T.
AT&T purchased NextWave Wireless for an upfront payment of $25 million and an additional contingent payment of up to $25 million. AT&T will also assume NextWave Wirelesses’ $600 million debt. Majorities of both NextWave Wirelesses’ shareholders and debt holders have agreed to support the sale.
The sale must be reviewed and approved by the FCC. There may also be a separate review by the Federal Trade Commission and the Department of Justice under provisions of the Hart-Scott-Rodino Act. It is AT&T’s goal to finalize the sale by the end of 2012.