The FCC reportedly plans to free major carriers of their obligation to pay the $16 billion they bid in the NextWave spectrum auction, marking one of the few good signs for investors in the sector, analysts said.
The government reclaimed dozens of spectrum licenses from NextWave when the company filed for bankruptcy protection before paying the $4.7 billion it bid for the spectrum in 1996 -- but the licenses and who actually can lay claim to them have been a matter of fierce debate ever since.
Federal regulators may release an order seeking public comment on a range of options for settling the issue as early as Thursday, according to a report in
The Wall Street Journal
. The main proposal would allow the carriers to opt out of the auction and free themselves of their obligation to the government. By accepting this option, companies may be able to acquire the spectrum more cheaply in the future.
"By returning the wireless industry's $16 billion, Chairman Powell and the FCC will have demonstrated bold leadership and provided much-needed relief to the wireless industry," said CTIA Chief Executive Tom Wheeler in a statement. "Chairman Powell has said previously that the wireless industry faced a 'severe capital crisis.' This decision would do much to ease that crisis."
Tech-sector analysts applauded the decision. "For the wireless industry, already burdened by too much debt, this is a classic case of addition by subtraction," wrote Morningstar analyst Todd Bernier in a research note. "Despite needing spectrum to alleviate capacity constraints, carriers like AT&T Wireless can ill afford the billions they committed to years ago when the capital markets were very different."
Credit agencies viewed the companies' pending payments for the spectrum as a liability, said Yankee Group wireless services analyst Roger Entner. "It's been quite crippling," he said, noting that credit agencies viewed the expected payment as debt.
was on the hook for $8.7 billion, and stands to benefit most from this news, according to a recent report by the Precursor Group.
was expected to pay $2.9 billion, the same report said. "The real upside for wireless carriers is that their established lines of credit can be freed up for other purposes," noted Precursor Group analyst Rudy L. Baca.