Spectrum Swap in Sight at Nextel

Nextel (NXTL) shares rose Thursday as the wireless telco closed in on a favorable ruling from federal regulators.

The Federal Communications Commission has three of the five votes necessary to approve a plan that would give Nextel a new swath of radio frequency, according to a report in Thursday's Washington Post. The radio spectrum swap, in which Nextel would vacate airwaves used by emergency services in exhange for some high-priced real estate elsewhere, could set the telco up for a bit of a windfall.

The agreement would require Nextel to chip in as much as $2.35 billion toward the process. That's $1.5 billion more than the company proposed, according to the Post. The plan is due to come to a vote at the FCC's monthly meeting next Thursday.

Based on the reported cost to the company and the value of the new spectrum, Legg Mason analyst Craig Mallitz estimates that Nextel will get a net gain of $1.7 billion. Mallitz has a buy rating on Nextel, and his firm holds a small stake in the company.

"This would certainly give them a big win," says Mallitz. "I think payment terms and timing" is now the big issue, he says.

Auction Talk

The swap proposal has been the subject of heated debate in Washington and on Wall Street, as the FCC attempts to balance the interest of public safety with the value of scarce wireless spectrum central to the interests of a highly competitive industry.

For example, rivals like Verizon Wireless -- a joint venture of Verizon (VZ) and Vodafone (VOD) -- have argued that the chunk of 1.9ghz spectrum that Nextel could gain is worth $7.2 billion. They say the spectrum should be auctioned rather than given away. But industry observers question the validity of those politically charged estimates and the viability of an auction.