A bankrupt beloved

WorldCom and Verizon Communications reportedly are considering buying bankrupt carrier Teligent as part of efforts to make last-mile plays in untapped markets, according to industry analysts.

Earlier reports also had IDT, which had acquired more than one-third of Teligent in April, showing interest in gaining control of the company. However, more recent news said that IDT withdrew its offer after not receiving a response from Teligent's main creditor.

While an IDT spokeswoman declined to discuss the offer or its withdrawal, she did confirm that IDT's three representatives on the Teligent board have resigned.

Teligent's fixed wireless network offers direct access to customers without having to use infrastructure belonging to incumbent carriers, making it attractive to long-distance providers such as IDT and WorldCom, said Patrick Comack, telecom analyst with Guzman & Co.

“I can see all the long-distance companies being interested because I know that they've all said they believe that they can penetrate the local loop with fixed-wireless and circumvent the local exchange carriers,” he said.

WorldCom already owns MMDS fixed wireless spectrum, but the future of that bandwidth is being reconsidered as the mobile industry seeks additional spectrum that will allow it to offer third-generation services.

Teligent's assets
Operational domestic markets	43
Number of 24 GHz licenses covering	74
Number of customers	35,000*
2000 revenues	$152 million
*As of Dec. 31, 2000 Source: Teligent

On the other hand, Teligent's spectrum in the 24 GHz band can be used only for fixed wireless purposes practically. Because of its high frequency, Teligent's spectrum allows greater throughput than most mobile services but has a significantly shorter range than is needed for PCS or cellular offerings, said Phil Marshall, senior analyst with The Yankee Group.

Although Verizon has last-mile access within its region, buying Teligent's assets would give it high-speed access options out of region, giving it the ability to compete with other RBOCs in their territories, said Floyd Greenwood, senior wire-line telecommunications analyst with Prudential Securities.

But the greatest attraction to Verizon is the severely deflated price it likely would pay for a company in bankruptcy, according to Greenwood.

“At 20¢ on the dollar, the assets would look attractive,” he said. “At one for one, it wouldn't happen.”

But Comack questions Verizon's interest at any price. If Verizon wants to buy assets out of bankruptcy, the RBOC would be more likely to pursue fiber assets that would let it build out its global and U.S. metropolitan networks, he said.

Acquiring a bankrupt company is more complicated than a normal merger or acquisition because any deal needs approval from the presiding judge, who must consider the opinions of creditors, said Stephanie Wickouski, a bankruptcy lawyer and partner in the law firm Arent Fox Kintner Plotkin & Kahn. In extreme situations, a secured creditor can even block an acquisition.

In addition, after the bankrupt company accepts an acquisition offer and takes it to the court, the judge typically opens the bidding to other interested parties.

Teligent, Verizon and WorldCom all declined to comment for this story.