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Verizon helps NextWave out of cell phone business

November 7th, 2004

In the deal announced Friday Verizon Wireless is buying the remaining cellular capacity from NextWave Telecom for $3 billion in cash. These significant portions of cellular spectrum add to the existing company´s capacity in such key areas as New York, Boston, Washington and Los Angeles and allow establishing a foothold in some of the “Verizon-less” areas where it now relies on other operators to provide service.

The capacity, which is going to change hands, is part of the licenses that NextWave agreed to buy from the FCC for $4.7 billion eight years ago. The company has since then proven unable – or unwilling – to launch any service. Consequently, it defaulted the debt to the FFC, had to seek for Chapter 11 protection and eventually came to the decision to leave the cell phone business for good. The deal with Verizon makes this decision official.

Verizon Wireless, the fastest growing US cellular provider, becomes more and more hungry for bandwidth as its expanding subscriber base gets used to such services as high-speed Internet connection for laptops and interactive games for cell phones.

According to analysts´ estimates, the additional capacity should be sufficient for adding a few millions of new subscribers without compromising the quality of service.

The move seems to be a timely response to the AT&T – Cingular $41 billion merger announced a day earlier, which created the biggest cellular operator and filled gaps in Cingular´s coverage. With more capacity available and superior bandwidth utilization technology Verizon has good chances to reclaim its position as the number one in the cell phone business.

The companies have to get approvals from the US Bankruptcy Court in addition to the FCC and antitrust regulators but nevertheless the deal is expected to be completed in the middle of 2005.

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