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WASHINGTON (MarketWatch) - Nextel Communications agreed to swap airwaves as part of a $4.8 billion federal plan to end wireless interference with frequencies used by firefighters and police officers.
Under the agreement, the company will pay to reconfigure a slice of spectrum known as the 800-megahertz band and relocate users where necessary. Nextel aims to separate commercial users and public safety officials who rely on wireless phones.
As part of the deal, the government will give Nextel (NXTL: news, chart, profile) new wireless licenses on a portion of the 1.9-gigahertz band.
Customers don't need to get new phones, according to Robert Foosaner, the company's chief regulatory officer. The transition "will be seamless to them," he said.
Some public safety officials, however, may have to buy some new equipment, Foosaner added. Nextel would have to pay for the necessary changes.
Under a complex formula, Nextel is required to spend $4.8 billion to enact the swap over a three-year period. If the company spends less, it would contribute any savings to the U.S. Treasury.
The 800-megahertz spectrum the company is giving back has been valued at $2 billion. Nextel is expected to pay up to $1.3 billion to revamp the band to eliminate interference with public safety users.
The difference between the $3.3 billion combined amount and the $4.8 billion cap would be allotted to the federal government -- in this scenario, about $1.5 billion. Nextel executives say it could be more if the transfer costs less.
Sprint (FON: news, chart, profile) , which plans to acquire Nextel in a $35 billion deal, will honor the agreement, Nextel said. The companies unveiled their merger in December, the latest in a series of big deals shaking up the phone industry.
The switchover is expected to take three years, but company executives, public safety officers and officials at the Federal Communications Commission say they expect some snags along the way.
Aside from meeting public safety concerns, Nextel also gets a valuable slice of the 1.9-megahertz spectrum. The company had planned to use the spectrum to offer new high-speed wireless services and expand beyond its largely mobile-worker clientele.
Verizon Wireless had tried to block the swap, but it dropped its opposition last year after working out a deal with Nextel.
FCC Chairman Michael Powell called the issue the most difficult and "mind-numbing" that he's dealt with in his seven years at the agency.
"It's always gratifying to untangle a knot," he said.
Chief Robert DiPoli, president of the International Association of Fire Chiefs, lauded Nextel's decision. "A lot has been asked from them and they've stepped up to the plate," he said.
In Monday afternoon trades, shares of Nextel closed 52 cents lower at $29.28.
WASHINGTON (MarketWatch) - Nextel Communications agreed to swap airwaves as part of a $4.8 billion federal plan to end wireless interference with frequencies used by firefighters and police officers.
Under the agreement, the company will pay to reconfigure a slice of spectrum known as the 800-megahertz band and relocate users where necessary. Nextel aims to separate commercial users and public safety officials who rely on wireless phones.
As part of the deal, the government will give Nextel (NXTL: news, chart, profile) new wireless licenses on a portion of the 1.9-gigahertz band.
Customers don't need to get new phones, according to Robert Foosaner, the company's chief regulatory officer. The transition "will be seamless to them," he said.
Some public safety officials, however, may have to buy some new equipment, Foosaner added. Nextel would have to pay for the necessary changes.
Under a complex formula, Nextel is required to spend $4.8 billion to enact the swap over a three-year period. If the company spends less, it would contribute any savings to the U.S. Treasury.
The 800-megahertz spectrum the company is giving back has been valued at $2 billion. Nextel is expected to pay up to $1.3 billion to revamp the band to eliminate interference with public safety users.
The difference between the $3.3 billion combined amount and the $4.8 billion cap would be allotted to the federal government -- in this scenario, about $1.5 billion. Nextel executives say it could be more if the transfer costs less.
Sprint (FON: news, chart, profile) , which plans to acquire Nextel in a $35 billion deal, will honor the agreement, Nextel said. The companies unveiled their merger in December, the latest in a series of big deals shaking up the phone industry.
The switchover is expected to take three years, but company executives, public safety officers and officials at the Federal Communications Commission say they expect some snags along the way.
Aside from meeting public safety concerns, Nextel also gets a valuable slice of the 1.9-megahertz spectrum. The company had planned to use the spectrum to offer new high-speed wireless services and expand beyond its largely mobile-worker clientele.
Verizon Wireless had tried to block the swap, but it dropped its opposition last year after working out a deal with Nextel.
FCC Chairman Michael Powell called the issue the most difficult and "mind-numbing" that he's dealt with in his seven years at the agency.
"It's always gratifying to untangle a knot," he said.
Chief Robert DiPoli, president of the International Association of Fire Chiefs, lauded Nextel's decision. "A lot has been asked from them and they've stepped up to the plate," he said.
In Monday afternoon trades, shares of Nextel closed 52 cents lower at $29.28.
