AT&T Wireless could owe $6B if W-CDMA rollout is late

Computerworld - AT&T Wireless Services Inc. could have to pay NTT DoCoMo of Tokyo as much as $6 billion plus interest if it fails to roll out high-speed cellular data services based on technology developed by NTT DoCoMo in four U.S. cities, according to filings made last week by AT&T Wireless with the U.S. Securities and Exchange Commission.
The payment revolves around a November 2000 agreement by NTT DoCoMo to buy a minority interest in AT&T Wireless that now amounts to 474.7 million shares, or roughly 16% of the company's stock (see story). In return, AT&T Wireless agreed to roll out wideband Code Division Multiple Access technology (W-CDMA) developed by NTT DoCoMo in 13 of the 50 largest cities in the U.S. by June 2004.
Last week, however, AT&T Wireless and NTT DoCoMo announced an agreement to scale back that rollout to just four U.S. cities -- San Francisco, San Diego, Seattle and Dallas -- with the start date pushed back to December 2004 (see story).
In its SEC filing, AT&T Wireless disclosed that if it doesn't roll out W-CDMA service at a total of 1,000 cell sites in the four cities by December 2004, it could be forced to repay NTT DoCoMo $6 billion plus four years' interest at an unspecified rate. That's the amount NTT DoCoMo paid for its minority share in AT&T Wireless. Alternatively, NTT DoCoMo could sell its 474.7 million shares on the open market, the filing said, with AT&T Wireless making up the difference -- if any -- between the proceeds of the stock sale and the original NTT DoCoMo investment.
David Caouette, a spokesman for Redmond, Wash.-based AT&T Wireless, acknowledged that based on the documents filed with the SEC, the company could be liable for the total repurchase price in cash. But, Caouette said, a more likely scenario would be a stock sale. AT&T Wireless stock currently sells for roughly $6 a share. At that price, NTT DoCoMo would receive approximately $2.4 billion if it sold its stock, leaving AT&T Wireless on the hook for $3.6 billion. Caouette said no one knows what the price of AT&T Wireless stock will be in two years.
He doubted either event would happen. "We are thoroughly committed to W-CDMA, and we are thoroughly committed" to roll out the service in the four markets by December 2004, Caouette said.
Alan Reiter, an analyst at Wireless Internet & Mobile Computing in Chevy Chase, Md., said the agreement with NTT DoCoMo leaves AT&T Wireless in an "awkward" financial position with a technology