US mobile operator Sprint Nextel has given satellite/terrestrial venture LightSquared until mid-March to gain regulatory approval if they are to proceed with their planned infrastructure sharing agreement.
Sprint had previously given LightSquared…
US mobile operator Sprint Nextel has given satellite/terrestrial venture LightSquared until mid-March to gain regulatory approval if they are to proceed with their planned infrastructure sharing agreement.
Sprint had previously given LightSquared until 30 January 2012 to receive the green-light from the FCC, after extending an original deadline that was set to expire on 31 December 2011.
Under the proposed agreement, announced in July 2011, LightSquared would pay Sprint US$9bn for spectrum hosting and network services. The deal would also enable Sprint to acquire up to 50% of LightSquared’s expected L-band (1.6GHz) spectrum.
But the FCC is still investigating the extent of LightSquared’s GPS interference issues before deciding whether to allow it to launch commercially. On 27 January, the regulator announced a public consultation on the matter, which has a 27 February deadline for interested parties to provide comments, with replies due before 13 March.
It remains to be seen whether the FCC’s apparent delay to make a decision on the issue could constitute as a Material Adverse Change (MAC) on LightSquared’s debt covenants, enabling debtholders to force it into bankruptcy. This could make for an interesting scenario as reports have suggested that activist investor Carl Icahn has been buying up LightSquared debt – a process that could see him wrestle for control of the venture from current backer Harbinger Capital Partners, the New York-based hedge fund.
Although LightSquared has recently claimed it has enough cash to last it several quarters, the delay to launch commercial services could also impact the regular payments it has been making to UK-based MSS operator partner Inmarsat, as part of a spectrum leasing deal.
Industry spectators have pointed to how LightSquared is due to pay Inmarsat a further US$30m as part of this agreement around 1 April, when it is also due to pay interest on its debt.
However, LightSquared welcomed the FCC’s consultation, with a spokesman saying: “If the FCC decides in LightSquared’s favour it would establish with finality that GPS makers are at fault for designing devices that depend on the unauthorised use of LightSquared’s spectrum.”
LightSquared had filed a petition on the matter to the FCC on 20 December. In a public statement on that day, the venture said that it had asked the regulator “to confirm that commercial GPS manufacturers have no right to interference protection from LightSquared’s network since they are not licensed users of that spectrum”.
Speaking before the FCC’s announcement on LightSquared’s petition, Maury Mechanick, a counsel at White & Case in Washington, said that the regulator was in a difficult position regarding the satellite/terrestrial venture.
Mechanick highlighted two key questions:
The first of these was the issue of why the FCC gave LightSquared a licence “if the intended commercial operations under that license were impossible to commence”.
The second was the possibility of a “complete sanitisation of a significant swath of bandwidth from any possible wireless broadband usage at a time of critical bandwidth shortages for such purposes, if some workable solution cannot be devised”.
If LightSquared were not to be allowed to provide services with its spectrum holdings due to GPS interference, the same issue could affect any other company attempting to use that spectrum. In a context where many telcos are complaining of a spectrum shortage, this could potentially make a large amount of spectrum unusable.
Mechanick said that he believed litigation would be “the absolute last choice” for LightSquared, but he did not rule it out.
