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content


Aerwv prepares to buy most of Securicor Wireless

Aerwv prepares to buy most of Securicor Wireless

In about two months, a newly formed company, New York–based Aerwv is expected to become the new owner of the 220MHz spectrum and airtime business now
  • Written by Urgent Communications Administrator
  • 12th October 2001

In about two months, a newly formed company, New York–based Aerwāv is expected to become the new owner of the 220MHz spectrum and airtime business now owned and operated by the Securicor Wireless subsidiary of United Kingdom–based Securicor. The transaction was defined in a contract signed on Sept. 25. Closing awaits FCC approval of license transfers, which usually takes about 60 days.

Securicor reported in May 2001 that it had received an offer of $36 million for Securicor Wireless’ spectrum and its three operating businesses, including airtime sales, land mobile radio equipment sales and distribution, and linear modulation research and development. The LMR business was sold separately in July to Midland Radio, Kansas City, MO. The R&D business, Securicor Wireless Technology, Bath, United Kingdom, is excluded from the Aerwāv transaction.

Purchase price: ‘nominal’

Aerwāv purchased of the spectrum and airtime sales business for “a nominal consideration only,” an announcement from Securicor said. “With a rapidly deterioriating U.S. communications market, it proved impossible to sell the business for the price indicated at the half-year.” Securicor virtually gave away to Aerwāv a U.S. radio communications business into which it is said to have poured an estimated $150 million to $200 million (some say as much as $350 to $400 million).

In its May 2001 financial disclosure, Securicor reported a loss of $8 million on $10 million in sales at Securicor Wireless during the previous six-month period. Securicor Wireless attributed the loss to the expense of building repeater sites to meet FCC construction deadlines.

Securicor Wireless had an estimated 140 U.S. employees a year ago. That roster has been trimmed to an estimated 40 employees. Although profits have been elusive, a year of cost-cutting may have positioned the remaining airtime business to operate without the crushing losses of past years.

Some say Securicor is selling its U.S. operations simply to stem the loss. Others say that Securicor has had so much success in acquiring security companies around the world to augment its already substantial UK package delivery and armored car services that it is divesting its U.S. operations as a matter of focus.

Personal funding

What’s behind Aerwāv? Securicor Wireless’ Chairman and Chief Executive Robert Shiver said that he owns 100% of Aerwāv and that he is funding the purchase from Securicor Wireless personally.

Shiver, who is Aerwāv’s chairman and chief executive, said that the company would continue to execute plans already in place at Securicor, including airtime rental and partnerships.

Among Securicor Wireless’ partners is the National Rural Telecommunications Cooperative, Herndon, VA. The two companies cooperated in purchasing 220MHz spectrum during the last auction. NRTC and its members are estimated to have spent $16 million on spectrum, infrastructure, subscriber units, marketing and sales efforts.

NRTC and Securicor Wireless had for a time cooperated in a strategy to convey statewide spectrum rights to various electric utilities. It was envisioned that the utilities with statewide spectrum rights would construct wide-area systems with capacity to serve the host utility’s internal communications and offer airtime voice, data and vehicle location services to other business and industrial users.

Bill Saul, a spokesperson for NRTC, said that the cooperative’s effort now centers more on making 220MHz channels and systems available to its members for internal communications and less on selling, leasing or otherwise making licenses available to its members for use on a statewide basis.

“We’re focused on core communications for our members,” Saul said. “Securicor Wireless is focused on the urban areas; rural America is where our members reside.”

Saul said that NRTC might make some of its channels available to Securicor Wireless in urban areas, if that’s what the company wanted.

“We’ve had those discussions. How we would go forward depends on their success as a spin-off. We’ve seen that Securicor Wireless has been converting more into an airtime service organization. We’re comfortable with that. We’re focused on aspects that are not necessarily of interest to them, such as SCADA, load management and meter reading. As long as we can come to some accommodation and if it’s mutually beneficial in urban areas for them to use some of our frequencies, I don’t see a conflict in whatever they do,” Saul said.

Troubled relationships?

Principals of Securicor Wireless, NRTC and Datamarine International, the latest OEM supplier to Securicor Wireless, put a placid, if not smiling, face on the status of their business relationships.

But an industry source said that NRTC’s efforts to promote SMR-like operations to its electric utility members were frozen in their tracks when Shiver announced at an NRTC member meeting six months ago that Securicor Wireless was “getting out of the product business.” A Securicor Wireless spokesperson said that what Shiver had announced was the company’s intention to divest its FM two-way radio sales and distribution business, and the company did so in July. Securicor Wireless continues to supply 220MHz infrastructure and subscriber products.

NRTC’s conservative members are said to have become reluctant to rely on a sole-source manufacturer that was “looking for an exit strategy,” whether or not they understood Shiver’s announcement the way he intended. Several NRTC member utilities that were in the middle of statewide system construction projects halted work.

Good system; ‘bad timing’

Northwest Telecommunications, a subsidiary of Peninsula Light, Gig Harbor, a small Washington state utility, built a statewide system between December 1999 and July 2000. Northwest Telecom purchased exclusive rights to use five channels licensed to NRTC in much of the state and purchased an Economic Area license in an FCC auction for other coverage it needed.

The company built a 16-site 220MHz linear modulation trunked system covering the Interstate 5 corridor from Portland, OR, to the Canadian border; west from Seattle to Coeur d’Alene, ID; and a spur into the cities of Pascoe, Kennewick and Richland. Northwest Telecom’s two sales representatives called on referrals from six dealers with limited success. The system has four customers with about 80 mobile units among them.

A source close to Northwest Telecom said that the company might have been ahead of its time, and that economic conditions weren’t as good as had been expected. The company did not promote as extensively as some service providers, and it found that the sales cycle was longer than had been anticipated.

Northwest Telecom’s plan was to build the network, begin serving commercial customers and eventually attract utility customers as they would migrate from systems adversely affected by FCC spectrum refarming.

A Northwest Telecom customer, Larry Loncon, president of Spokane Cab, Spokane, WA, said that he is “extremely pleased with the system” and that he is disappointed to have been notified that the network will be shut down. He said he has been happy with the airtime rate, the reduction of voice traffic resulting from the use of status messaging and Northwest Telecom’s ability to solve problems and answer questions.

Northwest Telecom advertised its 200MHz network for sale and used a local broker to find leads, but found no buyers. It already has decommissioned network sites where winter access is difficult and where its customers do not operate. The rest of the network will be taken down, and Northwest Telecom will go out of business, by the end of this month.

Several sources with connections to NRTC said that over a long period of time, delivery of equipment to members has been inconsistent. One indicated that equipment support, upgrading and adding features has been a slow process. He expressed the opinion that as a smaller and independent company, Aerwāv may find it even more difficult to deliver.

A ‘source of confusion’

Securicor Wireless has had to shop around for manufacturing service inexpensive enough to support competitive prices for 220MHz subscriber equipment. The United Kingdom-based, low-volume-oriented Radiocomms manufacturing business sometimes owned by and sometimes affiliated with Securicor (Radiocomms now is Herald Electronics) made the first 220MHz linear modulation repeaters, mobiles and portables. From mid-1999 to mid-2000, Securicor Wireless contracted manufacturing with E. F. Johnson Company, which made some LM mobiles and portables before exiting the OEM business.

Securicor Wireless named E. F. Johnson as one of its current 220MHz equipment suppliers, although an E. F. Johnson executive said, “No, we are not a supplier for Securicor Wireless.”

Through a spokesperson, Shiver said that a Kansas City, MO, company was another 220MHz equipment supplier, but the spokesperson did not know its name. On a continuing note of possible confusion, the spokesperson said that Datamarine is not a current supplier, although Shiver had said in a Sept. 19 interview that, at least at that time, it was.

Datamarine’s supplier agreement, described by someone close to the negotiations, had three provisions.

First, the two companies would co-develop an LM mobile, based on Datamarine’s latest mobile chassis, that would support Securicor Wireless’ linear modulation and MPT 1327-based advanced digital network trunking.

Second, Securicor Wireless would become a distributor and resell SEA product. Many 220MHz repeater networks acquired by Securicor Wireless in its license consolidation phase already used SEA technology.

Third, Securicor Wireless would receive warrants for the purchase of Datamarine stock that might allow a profit to be made if Datamarine’s stock price were lifted by the company’s doing business with Securicor Wireless.

The elements of the Securicor Wireless and Datamarine contract seem to have unraveled. Officials of both companies confirmed that some SEA LTR equipment had been provided to Securicor Wireless. Through a spokesperson, Shiver said that the ASIC chip to be used in the mobile product was “too expensive,” and that the “parties agreed to end the relationship.”

Although both companies have publicly expressed a willingness to do business, Shiver also has said he is open to other supplier arrangements for various technologies that can be used at 220MHz.

A future for Aerwāv

What are Aerwāv’s other possible alternatives? Industry sources said that Shiver may be anticipating a change in FCC regulation, including band manager provisions, that may stem from efforts to harmonize the regulation of 216MHz–220MHz spectrum with that of 220MHz–222MHz.

Another speculation that has been offered is that Shiver would soon resell the spectrum he is acquiring. A waiting buyer could be Neoworld, Bloomfield, NJ. Neoworld bought 900MHz spectrum owned by Geotek, a failed SMR operator. Nextel Communications, Reston, VA, previously tried to buy the Geotek spectrum, but its attempt was blocked by a since-expired spectrum limit imposed by a consent decree.

In part because Neoworld was co-founded by Brian McCauley, a Nextel co-founder and former president, Neoworld has been cast by some as a spectrum-acquisition surrogate for Nextel. It has been suggested that Neoworld might buy the spectrum from Aerwāv once Shiver strengthens title to his spectrum by meeting FCC construction requirements. Neoworld’s spokesman declined to comment about the company’s business plan.

Nextel owns a 15% stake in Mobex Communications, Jeffersonville, IN. Mobex operates the Watercom two-way radio network with Midwest and Gulf Coast waterway coverage in the 217MHz–219MHz Automated Marine Telecommunications Service band. It also operates the Regionet Wireless voice, data and AVL two-way radio system using 12.5kHz FM to cover the West Coast, East Coast and Great Lakes regions in the same frequency band.

FCC waiver

An important FCC waiver granted on Sept. 12 to Securicor Wireless will survive the Aerwāv purchase transaction. The waiver harmonizes construction deadlines for the company’s various current licenses encompassing 28 radio communications channels across the nation. The waiver application spells out Securicor Wireless’ intention to act as a band manager in leasing spectrum to other users.

Mark Crosby, president of Access Spectrum, Bethesda, MD, heads a company that has a license for 700MHz frequencies to act as a band manager. He said that, from a spectrum leasing perspective, the 220MHz band is more “convoluted” than the 700MHz band.

“You have 217MHz along the waterways, a pending LMDS auction, licensees at 220MHz with licenses won through lotteries and purchased at auction, regional and national licenses, and site-specific licenses. I won’t say it’s a morass, but although 220MHz is a good band, it’s a complicated band, through no one’s fault,” Crosby said.

“I’m biased,” he said, “but 700MHz is available today, it has a band manager, and it’s clean, although it has incumbent TV stations and other issues. The 220MHz band has its own issues.”

Shiver said that if Securicor Wireless hadn’t thought that 220MHz was a better platform, the company could have bid for the 700MHz guard band licenses. He listed the 220MHz band’s advantages as including a lower per pop per megahertz cost, a propagation advantage, equipment availability and freedom from incumbent TV stations.

“Both the 700MHz and 220MHz bands have good prospects, long term, for rental. In the near term, we should hit the market sooner at lower cost,” Shiver said.

Shiver said that Aerwāv would continue the purchase of existing licenses and systems and would continue to roll out new repeater installations around the country. He mentioned the possible acquisition of systems in the 217MHz–220MHz band that might be networked with Aerwāv systems in the 220MHz–222MHz band.

For its part, Securicor Wireless Technology owns intellectual property rights connected with linear modulation, a transmission technology used by Securicor Wireless to fit voice and data communications within radio channels 5kHz wide. SWT, once named Linear Modulation Technology, has been known to license LM to other manufacturers. But LM’s most extensive use has been on a portion of Securicor Wireless’ 220MHz two-way radio dispatch networks. The rest of the Securicor Wireless networks use amplitude companded single-sideband transmission and “logic trunked radio” trunking technology supplied by Datamarine.

Alternative technologies for 220MHz

Shiver said that Aerwāv is open to using multiple technologies on its spectrum.

“We believe in an expanding spectrum pipeline with multiple suppliers whether they use LM, ACSSB or other technologies with a 12.5kHz footprint. Different markets and applications with various infrastructures can use pipeline. We’re embracing anyone to make products for different market niches,” Shiver said.

“Aerwāv is an extension of the strategy that has evolved at Securicor Wireless since I joined the company four years ago. The ‘new economy’ has changed the landscape for good. In the meantime, we believe that radio spectrum itself is a requirement of the new economy. Want to keep abreast of the trends and create partnerships that put spectrum to its best use,” Shiver said.

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