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.
An FCC representative declined to comment on the status of the plan, but disputed the notion that Nextel would see a windfall from any agency decision. "There's simply no guarantee of how much the spectrum could be sold for," says FCC rep Lauren Patrich. Wireless calling volumes are soaring as more than half the U.S. population now uses a cell phone. On top of that, mobile data traffic is starting to rocket as telcos offer faster Net connections for email, photo swapping and Web browsing. This has fueled greater demand for wireless spectrum, especially in the higher capacity frequencies like 1.9ghz. But the growth of cell phone use has also further disrupted fire and police communications, which happen to share the 800mhz airwaves with commercial carriers. The FCC is under pressure to ensure public safety and faces few alternatives outside the Nextel swap proposal that meet that objective.