WASHINGTON — Seattle billionaire Craig McCaw, who last year sold his cellular phone empire to AT&T Corp., said Wednesday that he will invest up to $1.1 billion in wireless communications carrier Nextel Communications Inc.
The deal is a huge boost for Nextel, which is struggling to roll out a nationwide digital wireless communications system based on technology from Motorola Inc. Nextel had been aiming to compete head-on with the cellular phone industry, but with McCaw's financial backing and advice it will now pursue a scaled-down strategy focused on businesses with fleets of vehicles and large corps of mobile workers.
"Mixing one part Craig McCaw vision with one part Motorola technology gives us at Nextel a recipe for even more potent integrated wireless business solutions," Morgan E. O'Brien, chairman of Nextel, said at a New York news conference. O'Brien called McCaw's backing "the most respectable endorsement obtainable in the wireless industry."
McCaw has apparently been itching to get back into the burgeoning wireless business since selling his company to AT&T for $12.6 billion. He was a bidder in the Federal Communications Commission's recent auction of licenses for mobile communications services known as PCS, but he ultimately dropped out, saying the prices were too high.
Nextel, which is about 20% owned by Motorola, was formed in 1987 and has accumulated radio dispatch licenses around the country with the aim of developing the first nationwide digital wireless system. But the firm was dealt a big setback 17 months ago when long-distance telephone giant MCI Communications Corp. broke off plans to invest $1.3 billion in the company.
Shares of Nextel, which had spurted to about $50 a share on news of MCI's possible investment, plummeted, and many questioned the company's technology. But with Wednesday's announcement, Nextel shares rocketed $3.375 to $16.625 on Nasdaq in heavy trading. McCaw and members of his family agreed to initially purchase about $300 million worth of preferred Nextel stock and $14.9 million of common stock, along with about $50 million of common stock owned by Motorola. If the agreement is approved by current Nextel shareholders and various regulatory bodies, McCaw and his family will be allowed to purchase another 39 million Nextel shares at prices ranging from $15.50 to $21.50 a share.
