The Federal Communications Commission (FCC) has finally granted Terrestar Networks authorisation to operate its dual-mode mobile terminals via its Terrestar-1 satellite or ATC base stations.
The decision is a huge fillip for Terrestar, not just in that…
The Federal Communications Commission (FCC) has finally granted Terrestar Networks authorisation to operate its dual-mode mobile terminals via its Terrestar-1 satellite or ATC base stations.
The decision is a huge fillip for Terrestar, not just in that it paves the way for full commercial operations but because the satellite operator had until January 20 to secure FCC approval, otherwise it would have defaulted on the US$300m debt that it raised from Harbinger Capital and EchoStar back in February 2008.
In an email sent to the associate chief of the FCC’s satellite division Karl Kensinger and dated October 12, 2009, Terrestar’s deputy general counsel and SVP Alexandra Field outlined the importance of obtaining the ATC authorisation.
Field stated: “The deal under which we got financing for our second satellite – the one that will anchor the ATC – has an event of default related to ATC authorisation. Section 7.01 (o) (ii) states that if we don’t secure the FCC ATC Authorisation by three months after the date we’ve certified that we are operational to the FCC, then the interest rate on the money we borrowed to build the satellite increases. The interest rate increases again for each of the next two months. If, however, we have not received our authorisation from the FCC by the third month, it is deemed an event of default against the loan.”
She adds: “In our case, the clock started on July 20 of this year. Next Tuesday (October 20) the first deadline hit…the next two hits come the Friday before Thanksgiving and the weekend before Christmas…the real hit is January 20, 2010. Given how far we’ve gone on the second satellite and the fact that we will be in money raising mode by the end of this year, triggering the even of default would likely by catastrophic to the company.”
Under the Commission’s rules an applicant for ATC operating authority is required to “demonstrate … through certification that it does or will comply with a requirement to maintain a spare satellite on the ground within one year of commencing [ATC] operation ….”
To that end, TerreStar had asserted in its request for authority that it would meet the requirement to have a spare satellite on hand within one year after commencing ATC operation. However, in its comments on the application, Inmarsat argued that TerreStar had not presented a substantial prospective showing regarding compliance with the spare-satellite requirement, maintaining that in order for TerreStar to satisfy that requirement it should submit a copy of the construction contract for the spare satellite and disclose the current status of the contract, the current state of construction progress, and the target date for commencing ATC operation.
In a subsequent statement filed on November 12, 2009, the general counsel for TerreStar reported that the company did not currently expect to commence commercial ATC operation before late 2010 and has accordingly postponed the scheduled delivery of the spare satellite, TerreStar-2, to the last quarter of 2011. The counsel also reported that construction of TerreStar-2 was 85% complete and that TerreStar had paid approximately 91% of the contract price for its construction to the manufacturer, Space Systems/Loral.
In summing up his decision, the chief of the FCC’s International Bureau satellite division, Robert Nelson, stated: “The substantial reported progress in constructing a spare satellite and TerreStar’s reiterated statements of intention afford reasonable assurance that construction of that satellite will be completed. To ensure that the spare-satellite gating requirement will be met, we condition the grant of ATC operating authority to prohibit commencement of commercial operation more than one year in advance of the delivery deadline in TerreStar’s construction contract for its spare satellite, TerreStar-2.”
