The US telecoms regulator has rejected satellite/terrestrial venture LightSquared’s proposed network rollout, after an official report concluded that there is currently “no practical way” to mitigate the company’s GPS interference problems.
An…
The US telecoms regulator has rejected satellite/terrestrial venture LightSquared’s proposed network rollout, after an official report concluded that there is currently “no practical way” to mitigate the company’s GPS interference problems.
An FCC spokesperson said in a statement that the regulator will not lift its prohibition on LightSquared from beginning commercial operations as long as the interference issue remains unresolved.
The spokesperson added that the FCC is planning to withdraw the conditional approval that was originally given in January 2011 to allow LightSquared to deploy its network.
The FCC’s statement was released after the NTIA, the president’s adviser on telecoms and technology policy, had submitted its analysis of testing on LightSquared’s technology.
The FCC is set to release a public notice later today, which calls for comments on the NTIA report and on the FCC’s planned response.
Writing on behalf of the NTIA, Assistant Secretary for Communications and Information Lawrence Strickling said that the organisation had concluded that “there is no practical way to mitigate the potential interference at this time”.
In response, LightSquared said that it will continue to work with the authorities to resolve all concerns. The venture also argued that the NTIA’s recommendation depended on “flawed conclusions” from the government body, known as PNT EXCOM, which had organised the testing of LightSquared’s technology.
The financing situation
LightSquared claimed in a conference call on 18 January that it has enough money to last it several quarters and that it is not looking to raise money.
LightSquared’s main financial backer, New York-based hedge fund Harbinger Capital Partners, admitted last week that the value of the fund portfolio had declined by 47%.
While Harbinger’s results were not released publicly, a spokesman said the decline in value was “primarily due to a conservative adjustment of the Fund’s holdings of LightSquared”.
Bloomberg reported that the main Harbinger fund had valued its equity and loans to LightSquared at US$1.07bn, as of 27 January.
The newswire wrote that renowned activist investor Carl Icahn, as well as investors Andrew Beal and David Tepper, had acquired US$300m of LightSquared’s debt that was sold by hedge fund Farallon Capital Management.
The FCC’s decision could potentially also affect the spectrum leasing agreement between LightSquared and UK-based mobile satellite services (MSS) operator Inmarsat, which sees LightSquared paying to lease Inmarsat spectrum.
An Inmarsat spokesman said that LightSquared’s payments are currently up-to-date.
What now for LightSquared?
In January, mobile operator Sprint Nextel had extended LightSquared’s deadline to receive regulatory approval. This approval is required in order to implement an infrastructure sharing agreement between the companies.
A Sprint spokesman confirmed that the company was reviewing the government’s comments, but declined to make any further statement on them.
In a note, Credit Suisse analyst Jonathan Chaplin said that mobile operator Sprint Nextel would need to return a portion of the US$310m that it had been paid by LightSquared.
Chaplin described the recent developments as a modest negative for Sprint and a modest positive for WiMAX wholesaler Clearwire.
“With LightSquared firmly out of the picture, we believe carriers have to start dealing with [Clearwire]. We expect one or more deals by mid-year,” Chaplin said.
Andrew Lipman, head of Bingham McCutchen’s telecoms practice, said that any appeal by LightSquared against an FCC decision would be an “uphill climb” for the venture.
Such an appeal would likely go to the court of appeal for the DC circuit, which has traditionally shown deference to the FCC on spectrum matters.
Lipman also suggested that LightSquared may try to advocate for additional testing under different conditions or for a spectrum swap, possibly with government-held spectrum.
