The US telecoms regulator has rejected satellite/terrestrial venture LightSquared’s proposed network rollout, after an official report concluded there is “no practical way” to mitigate the company’s GPS interference problems.
An FCC spokeswoman…
The US telecoms regulator has rejected satellite/terrestrial venture LightSquared’s proposed network rollout, after an official report concluded there is “no practical way” to mitigate the company’s GPS interference problems.
An FCC spokeswoman said in a statement on 15 February that the regulator will not lift its prohibition on LightSquared from launching commercially as long as the interference issue remains unresolved.
She added that the FCC is planning to withdraw the conditional approval that was originally given in January 2011 to allow the venture to deploy its network.
The FCC’s public statement came after the NTIA, the US President’s adviser on telecoms and technology policy, released its analysis of testing on LightSquared’s technology.
Writing on behalf of the NTIA, government official Lawrence Strickling said “we conclude that LightSquared’s proposed mobile broadband network will impact GPS services and that there is no practical way to mitigate the potential interference at this time”.
Strickling is an assistant secretary at the US Department of Commerce, and his comments were in a letter to FCC chairman Julius Genachowski.
The FCC subsequently issued a public notice calling for comments on the NTIA report by 1 March.
In response, LightSquared said that “the FCC has harmed not only LightSquared, but also the American public by making it impossible to build out a system that would meet public policy goals of successive administrations”.
The venture said it was still committed to finding a solution and believed that a solution could be found “if all the parties have that same level of commitment”.
It added that it had already spent almost US$4bn on the network project.
SatelliteFinance understands that Harbinger Capital Partners, the hedge fund that is LightSquared’s main financial backer, has hired Kirkland & Ellis LLP and Latham & Watkins LLP for legal advice on the matter.
The financial situation
Reports also suggest that LightSquared has hired Moelis & Co to look at the venture’s restructuring options as the group’s inability to launch commercially places pressure on its funding resources.
However, Harbinger head Philip Falcone reportedly told Reuters in an email on 15 February that it is not considering a bankruptcy filing. The venture claimed in a conference call on 18 January that it had enough money to last it several quarters, and that it was not looking to raise money.
Yet Harbinger recently admitted that the value of its fund portfolio had declined by 47% in calendar 2011.
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 Harbinger’s main 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 impact a spectrum leasing agreement between LightSquared and UK-based MSS operator Inmarsat. The venture is reportedly due to make a US$56m payment to Inmarsat by 18 February. An Inmarsat spokesman declined to comment on speculation, but on 15 February said these payments were up-to-date.
What now for LightSquared?
In January, US mobile operator Sprint Nextel extended its own deadline for LightSquared to gain regulatory approval, in order to implement an infrastructure sharing agreement between the companies.
A Sprint spokesman confirmed that the company was reviewing the FCC and NTIA’s comments, but declined to make any further statements on them.
In a note, Credit Suisse analyst Jonathan Chaplin said Sprint would need to return a portion of the US$310m that it had been paid by LightSquared for their proposed network sharing arrangement.
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.
Reports have speculated that LightSquared could look to exchange licences held by the US Department of Defense.
