Satellite/terrestrial wireless broadband venture LightSquared will pay Inmarsat US$337.5m over the next 18 months after triggering a cooperative agreement on August 18 to increase the contiguous L-band spectrum of both parties.
Phase 1 of the agreement…
Satellite/terrestrial wireless broadband venture LightSquared will pay Inmarsat US$337.5m over the next 18 months after triggering a cooperative agreement on August 18 to increase the contiguous L-band spectrum of both parties.
Phase 1 of the agreement enables the re-banding of L-band spectrum covering North America, which will give LightSquared more flexibility to deploy its nationwide satellite/terrestrial 4G-LTE wireless broadband network in the US. This spectrum had become fragmented over time because its allocation relied on multilateral agreements working on a ‘first come, first served’ basis.
“It is the next logical step for LightSquared in the build out of our nationwide 4G-LTE network,” commented Tom Surface, director of corporate communications at LightSquared, which is backed by US hedge fund Harbinger Capital Partners.
In order to secure Federal Communications Commission approval, Harbinger committed to an aggressive build-out schedule for the next generation project. This promises coverage to at least 100 million people in the US by December 31, 2012, at least 145 million people by December 31, 2013, and at least 260 million people by the end of December 2015. To that end, in late July Harbinger announced a US$7bn eight-year contract with Nokia Siemens Networks to deploy, install, operate and maintain the next generation network.
Surface continued: “It has always been our plan to add capacity to our network to meet the growing demand for wireless data. We believe triggering this agreement now is essential to achieve this goal, meet the demand for wireless data, and execute our aggressive deployment plan for our nationwide, wholesale-only 4G-LTE network, integrated with satellite coverage.”
LightSquared has made an initial payment of US$81.25m to Inmarsat, prompting the latter to begin the 18 month process to modify its spectrum plan. LightSquared will continue to pay Inmarsat US$40m every three months during the process, until a final installment due in November 2011. Upon completion of Phase 1, a final payment of US$56.25m will be paid to Inmarsat.
The cooperative agreement was originally arranged in December 2007 between Inmarsat and SkyTerra, which became LightSquared after being acquired by Harbinger earlier this year. It also includes a Phase 2 option, which will see Inmarsat lease LightSquared some of its spectrum at a cost of US$115m per year.
LightSquared has until January 1, 2013, to trigger this second phase, which is then expected to take 30 months to process.
Surface declined to reveal when Phase 2 would be activated, but told SatelliteFinance: “It is our intent to initiate Phase 2 and we will announce the initiation when that determination is made.”
Harbinger owns a 29% stake in Inmarsat and for sometime had widely been tipped to launch a takeover bid for the MSS operator. However, following the acquisition of SkyTerra and subsequent launch of LightSquared, such speculation dwindled.
