NextWave Lays Off 40 in Restructuring
SAN DIEGO — Under pressure to cut costs and deliver a nationwide communications network for which it paid $4.9 billion in licenses, NextWave Telecom said it has restructured the company and laid off about 40 Southern California employees.
The layoffs were prompted by unfavorable “financial and regulatory environments” surrounding the wireless industry, a NextWave spokeswoman said. Despite the downsizing, NextWave said it still plans to begin offering personal communication services, or PCS, in selected markets in 1998.
The company declined to say how many of its 380 employees overall were laid off, saying only that it was “downsizing in a number of markets, taking steps to conserve resources and to better position ourselves,” spokeswoman Jennifer Walsh said Wednesday. The restructuring would involve shifting resources toward certain prospective markets and concentrating on the company’s contracting and engineering functions, the company said.
The upstart San Diego-based company has faced several obstacles since it successfully bid for wireless licenses in auctions conducted last year by the Federal Communications Commission. NextWave plans to connect 90 cities with digital telecommunications technology developed by Qualcomm, another San Diego company.
Although NextWave said it would be strictly a wholesaler of airwaves, skeptics wondered whether it could compete in markets where a new generation of wireless carriers--up to seven in some cities--will slug it out with the two cellular phone companies already present in most localities.
In January, the FCC ordered NextWave to dilute foreign investors’ interest in the company by raising additional domestic capital, after losing bidders in the auction claimed that the 30% aggregate foreign ownership of NextWave stock was beyond the government cap.
Sony, Nippon Telegraph & Telephone and major South Korean manufacturers are among major NextWave shareholders.
The FCC gave NextWave a temporary waiver of the order on May 16, saying consumers would be better served if NextWave were allowed to resume its capital-raising and network-building efforts than if it remained in limbo.
Despite an investment by MCI last summer that could equate to a 25% stake in NextWave over time, the company needs to raise hundreds of millions of dollars in additional capital to pay for its licenses and construct the network.
A stock offering that was to have raised more than $500 million last spring was called off, and the company has been unable to reschedule it because of its regulatory problems and because cellular stocks have traded low in recent months. The company filed an amended registration statement for a stock offering in February.
The company’s financial condition has been helped by agreements by certain vendors to finance the sale of some $1.4 billion in equipment to NextWave.
But of the $4.9 billion owed to the government, NextWave has paid only $500 million so far and must make interest-only payments of $275 million over the next six years.
