U.S. Examining Motorola Sales of Licenses for Wireless Links : Telecom: Review by Justice Department puts deals on hold. Technology would compete with cellular phones.
The Justice Department is reviewing Motorola Inc.’s proposed sale of radio licenses to buyers seeking to build a wireless network to rival the cellular phone industry’s. The move is the latest in a recent series of government and court actions that have slowed the race toward consolidation in telecommunications.
The Justice Department has asked for details on more than $2 billion worth of pending mergers that would transfer so-called specialized mobile radio (SMR) licenses, a digital, wireless telephone technology that uses a portion of the airwaves now employed mainly by taxi dispatchers.
Last fall, Motorola--a major chip maker and the leading manufacturer of hand-held SMR transceivers--agreed to sell scores of its SMR licenses to Nextel, CenCall Communications Corp. and Dial Page Inc. in exchange for stock.
The Justice Department would not comment on its probe, but a Nextel official and a former Justice Department lawyer said it is concerned that the deals might give Motorola too much control over the nascent SMR industry. Motorola would have major equity stakes in the three major SMR providers, and the three companies are expected to buy billions of dollars’ worth of equipment that uses Motorola’s SMR technology.
The transactions are being watched closely because they would increase competition with the fast-growing cellular phone network by speeding the introduction of digital wireless phone services. SMR phones, now offered in Los Angeles by Nextel, can convert voice and other communications into numerical codes with less distortion and much greater capacity than the analog telecommunications systems now in use.
Robert Foosaner, Nextel’s vice president of government relations, said Justice Department lawyers have twice requested information from his company, but he said they gave no indication that the deal with Motorola is in jeopardy.
“Whenever you have an acquisition of any size, you hear from the Justice Department,” Foosaner said. “While they’ve asked for information and made an inquiry, our response, so far, seems to have been satisfactory.”
The news, however, did not torpedo CenCall, Nextel or Dial Page on Wall Street. Nextel was unchanged at $35 a share, CenCall fell 75 cents to $23.25, and Dial Page lost 12.5 cents, closing at $33. The overall market fell sharply.
Still, “this is pretty serious business,” said Charles A. DiSanza, an analyst at Gerard Klauer, Mattison & Co.. He was one of several analysts who said a Justice Department review would have a chilling effect on investors’ interest in SMR technology.
“If, for some reason, these acquisitions are not permitted, then it would not be possible for these companies to put together a sufficient number of channels to compete against cellular,” DiSanza added.
The ex-Justice Department lawyer, who has closely followed the review of the deals, said that if the transactions are found to present antitrust problems, the agency could require restructuring some of the deals or ask that Motorola license its technology to all comers.”
