Global Insight Perspective | |
Significance | NextWave continues to make acquisitions as it attempts to gain scale in the infrastructure market and gain traction for its range of wireless broadband networking solutions. |
Implications | The two companies may be able to generate synergies but questions arise over plans to integrate two competing solutions in both mobile TV and broadband wireless. |
Outlook | NextWave has been through difficult times; this acquisition of a technology that has not gained mass acceptance in the market does not make the future any clearer. |
Video software and putative WiMAX player NextWave Wireless, the entity which emerged from bankruptcy following the US$3-billion acquisition of predecessor NextWave Telecoms' spectrum by Verizon, has announced that it is to acquire privately held network infrastructure and equipment vendor IPWireless (see United States: 4 March 2005: Verizon Wireless Receives Approval for Acquisition of NextWave Licences).
NextWave has agreed to pay US$25 million in cash and US$75 million in stock for the company, with further payments arising dependent on revenue targets being reached over the next few years. Additional payments may total US$50.0 million by the end of 2007, US$7.5 million in 2008, US$24.2 million in 2009, and US$53.3 million in 2010. Following approval processes, the deal is expected to close in the second quarter of 2007, when IPWireless will continue operations as a wholly owned subsidiary of NextWave.
IPWireless specialises in TD-CDMA, otherwise known as the Time Division Duplexing version of the 3G UMTS standard, TDD-UMTS, which is designed for optimal data throughput over limited width (5 MHz) channels with high mobility. It has also developed its own mobile TV technology, TDtv, which has just completed trials with several European-based operators (see United Kingdom: 12 October 2006: Mobile Operators Team up for TDtv Mobile TV Trials).
CEO of NextWave Allen Salmasi said that "IPWireless and NextWave will work together to expand IPWireless' product portfolio to incorporate WiMAX and/or Wi-Fi technologies for those service providers and equipment vendors that require such solutions." There are also set to be synergies between the TDtv solution from IPWireless and the PacketVideo subsidiary of NextWave, which has various video solutions, including mobile TV.
Outlook and Implications
Adding Assets and Mixing Standards: The addition of IPWireless may give NextWave flexibility in the products it can offer and allow it to produce integrated solutions that appeal to network operators more than the existing solutions provided by NextWave. The last results from NextWave showed that "substantially all" of the revenues generated by NextWave were from the PacketVideo subsidiary, with the WiMAX ventures so far showing little traction, which suggests that the products lack the appeal required to bring in a significant number of contracts. Significant questions exist about the redundancy of mixing TD-CDMA with WiMAX and Wi-Fi as an integrated solution. NextWave operate a business model that includes owning spectrum it will provide to clients, which somewhat steps on the toes of the core client base of network operators. Because of this model, NextWave may have problems with the initial large-scale contracts that would quickly generate revenues at this stage in the lifecycle of WiMAX, but hopes to generate higher operating revenues from owning more of the ecosystem. IPWireless has an existing network operator customer base and while this is far from extensive, it does provide a starting launch-pad into the networks. NextWave will also benefit from intellectual property owned by IPWireless, and which could prove key to raising revenues from the technologies.
Where the Customers Are: IPWireless has won TD-CDMA contracts in a dozen countries and is currently pushing the standard for the interoperable 700 MHz public safety network in the United States, with a contract win in New York boosting prospects for this (see United States: 22 December 2006: FCC Proposes 700 MHz National Public Safety Broadband Network). However, the standard has not yet reached critical mass and has suffered rejections from Sprint Nextel—a backer of IPWireless to the tune of US$14 million—which ended up choosing WiMAX for the core of its 4G plans (see Global: 20 January 2006: Sprint Nextel Makes Further Investment in IPWireless and United States: 10 January 2007: Sprint Performance Still Below Par, Looks to Future with WiMAX). TD-CDMA also suffered the further loss of prospective broadband wireless operator IPMobile in Japan only yesterday (see Japan: 9 April 2007: IPMobile Drops Mobile Service Plans). NextWave recently raised US$355 million to continue operations but lost US$105 million in 2006. It will soon need to start adding customers and generating revenues from the network operations that are the core of its plans (see United States: 3 April 2007: Nextwave Raises US$355 mil.in New WiMAX Funding).