Cingular Wireless, the second-largest U.S. mobile phone company, may buy some wireless spectrum from NextWave Telecom Inc. for as much as $1.5 billion, said people familiar with the potential deal.
An agreement may be at least a month away, one person said.
Cingular, based in Atlanta, is seeking to bolster service in markets such as Boston, Los Angeles and Washington, where it lacks coverage. NextWave has been offering to sell some of its 90 wireless licenses, valued at about $6.5 billion, since a court handed it ownership of the airwaves in January.
“Cingular has desperate need for spectrum,” said Phil Cusick, an analyst with Bear Stearns & Co. in New York.
Hawthorne, N.Y.-based NextWave has said it may sell some of its spectrum, which has lost more than half its value since 2001, and use the money to start its own wireless network with some of the remaining licenses. Analysts said the company should sell the spectrum, rather than trying to compete in an industry they say is crowded with six companies that operate nationwide.
“Most investors never really took the prospect of NextWave being a seventh carrier very seriously,” said Thomas Friedberg at Janco Partners Inc.
NextWave has licenses in the 10 largest U.S. markets, including New York and Los Angeles.
Cingular isn’t in discussions to buy the New York spectrum, said CNBC, which previously reported the talks.
Cingular, owned by SBC Communications Inc. and BellSouth Corp., sells service in New York City through a network-sharing agreement with Deutsche Telekom’s T-Mobile USA Inc. The company last year discussed buying AT&T; Wireless Services Inc., the third-largest U.S. mobile-phone operator, people familiar with the matter said. It also discussed acquiring T-Mobile USA.
The U.S. Supreme Court in January ruled that NextWave could keep the licenses. The Federal Communications Commission had sought to strip NextWave of the spectrum after it filed for bankruptcy in 1998. The licenses, worth as much as $16 billion in 2001, are now worth about $6.5 billion, said Legg Mason Wood Walker analyst Craig Mallitz.
Verizon Wireless Inc., the largest mobile-phone provider, AT&T; Wireless and Cingular all sought the airwaves in the past.
Bedminster, N.J.-based Verizon, which bid $8.8 billion for some NextWave licenses in 2001, has said it may try again to purchase some of the company’s airwaves. The FCC let Verizon and its peers cancel their original bids last year as the licenses declined in value and mobile-phone industry growth slowed.
NextWave, Cingular and Verizon all declined to comment on the issue.