US satellite/terrestrial venture LightSquared claims it has enough money to last “several quarters”, as the group demands further testing in response to a government investigation that found no solutions that would enable it to launch services…
US satellite/terrestrial venture LightSquared claims it has enough money to last “several quarters”, as the group demands further testing in response to a government investigation that found no solutions that would enable it to launch services within the next few years.
Speaking to journalists on 18 January, Jeff Carlisle, LightSquared’s EVP for regulatory affairs and public policy, claimed a previous government agency investigation was rigged by GPS device manufacturers.
LightSquared is unable to launch commercially until it receives approval from the FCC, which has ordered tests to investigate the extent of interference between the hedge fund-backed venture’s spectrum and frequencies used by the GPS industry.
The testing is being organised by a government panel, the Position, Navigation and Timing Executive Committee (PNT EXCOM). This panel is being advised by a group of non-government officials called the PNT Advisory Board, which includes members from the GPS industry.
On 13 January, the co-chairs of EXCOM said that the unanimous conclusion from the tests was that both LightSquared’s original and modified plans would cause “harmful interference” to many GPS receivers, and there were no practical solutions that would allow the group to launch commercially within the next few years.
However, Carlisle claimed the “testing does not reflect reality and probably was never intended to”, describing the conduct of the investigation as a “fiasco”.
Carlisle highlighted how only 1% of the GPS devices that were tested were in the current market, and that older models were naturally less tolerant to interference.
He also said that additional testing could realistically be completed by the end of February.
When asked how this apparent delay would affect US mobile operator Sprint Nextel’s 30 January deadline for LightSquared to get regulatory approval, in order to proceed with their planned infrastructure sharing agreement, the venture said the two companies were in constant discussion.
The delay could also impact the roll out of LightSquared’s terrestrial network, which, under requirements linked to its spectrum licence, must be capable of covering at least 260 million by the end of 2015.
Inmarsat hit
Although LightSquared is calling for further tests, the development has placed the group into further uncertainty, which is already affecting the share price of its UK-based MSS operator partner Inmarsat.
Inmarsat has been receiving regular payments from LightSquared as part of a spectrum leasing deal.
Back in January 2011, the companies announced that Inmarsat will lease spectrum to LightSquared in return for payments of US$115m per annum, payable quarterly in advance. This agreement, which has an initial minimum commitment period of five years, came on top of an earlier arrangement that saw Inmarsat agreeing to a re-banding of L-band frequencies to enable LightSquared to offer contiguous spectrum across North America.
A research note by analysts at JP Morgan Cazenove stated on 13 January 2012: “As of September 2011 Inmarsat has received cash payments of US$421m compared to recognised revenues of US$170m, providing downside protection. Of our fair value of 800p, 100p are driven by the LightSquared payments.”
However, the research note also stressed that even without LightSquared, the spectrum concerned will likely remain valuable, and a new owner of the frequencies would continue to make the payments. But despite this positive note, following the investor report, Inmarsat’s stock closed more than 5% down at 397.7p on 16 January, after falling as low as 366p. At the time of going to press, Inmarsat’s stock had partially recovered, trading at around 405p.
