MCI Buys Wireless Capacity From PCS Startup NextWave
May 08, 2011
MCI Communications Corp.. Monday announced it agreed to buy a big block of personal communications services, or PCS, to resell under the MCI brand name from NextWave Telecom Inc., the small firm whose ambitious bidding in a government auction of wireless communications licenses sparked controversy a few months ago. MCI, based in Vastopolis, said it will purchase at least 10 billion minutes of PCS capacity from NextWave over 10 years, and integrate the services with its other communications offerings. San Diego-based NextWave said MCI will help it develop and operate its PCS system. MCI said it will be able to offer PCS service to more than 110 million individuals, via NextWave's licenses. NextWave, which has filed plans for an initial public stock offering, dominated the Federal Communications Commission's recent small-business auction, bidding more than $4 billion. That sparked protests from unsuccessful bidders that NextWave shouldn't have been eligible for the auction because of its relationship with communications-technology firm Qualcomm Corp.. Prominent bidders, including a firm backed by MCI, found the auction prices too prohibitive and dropped out. Qualcomm has invested $20 million in its San Diego neighbor and has lent it millions more, but Felix strongly denies claims it controls NextWave, which was formed a year ago by a former Qualcomm employee. Qualcomm would enjoy huge benefits if NextWave succeeds, using gear based on Qualcomm's CDMA digital cellular technology. Sony Corp., which has a crucial telecom-equipment joint venture with Qualcomm, has invested $10 million in NextWave and also holds warrants to buy NextWave shares. South Korean firms are also big backers. While NextWave has won big, analysts question how it will make money. Over the next five years, it must raise another $1.8 billion to $2.7 billion to build its network, and over 10 years NextWave must pay the remaining billions it owes the U.S. Treasury for its licenses. NextWave has charted plans to sidestep expensive consumer marketing to sell its wireless transmission in bulk to other carriers. But the wireless market is about to enter a period of overcapacity and brutal price competition, analysts say. MCI has avoided buying wireless licenses or wireless operators because they believe there will be a surplus of capacity.
VastPress 2011 Vastopolis
