A fight to the death?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 11:28 am by timfarrar

Speculation is intensifying that a victor will be declared soon in the battle between Clearwire and LightSquared for a deal with T-Mobile, although developments in the 2GHz band remain interesting and could delay this process, as could positive noises about additional paired AWS spectrum (1755-1780MHz) being made available by the DoD.

UPDATE: Bloomberg is reporting that LightSquared “is considering bidding on satellite companies TerreStar Corp. and DBSD North America Inc.” because their “spectrum holdings would help LightSquared handle wireless traffic as it prepares to roll out a nationwide fourth-generation network”. This seems very curious, given that LightSquared will already have access to 40MHz of L-band ATC spectrum through its Phase 2 agreement with Inmarsat. It is also not obvious where the money for such a bid would come from. However, it does highlight the discrepancy in the cost of LightSquared’s spectrum versus DBSD and TerreStar. Of course, if Clearwire is prepared to sell 40MHz of spectrum to T-Mobile for “up to $2B“, it it far from clear that DBSD and TerreStar are worth much more than $1B each. Nevertheless, it appears this battle is a long way from being over, especially as DBSD’s second lien noteholders also appear to have reached an agreement with Sprint and will challenge the DISH bid for DBSD.

As I mentioned last week, it seems unlikely that the FCC would have approved the LightSquared waiver without some reassurance that LightSquared had the partners and funding to move forward, and journalists have apparently heard “rumblings that LightSquared may in fact be the partner of choice” for T-Mobile. On the other hand, other reports are suggesting that T-Mobile “may be close to a deal to buy wireless spectrum from Clearwire” which “could happen by the end of the first quarter”.

Obviously both sides are trying to shape media perceptions of themselves as the likely victor, while painting their opponents as being in dire straits. However, the battle is getting pretty ugly, with a request this week from a conservative watchdog group for a Congressional investigation into the FCC’s waiver grant to LightSquared, which appears suspiciously well timed, just like the news of an SEC investigation into Harbinger back in November. Nevertheless, it seems quite plausible that the request might be taken up by the Republicans, simply because it could provide a mechanism for “fishing expeditions” to question the White House, especially given the intervention of Democratic party officials on LightSquared’s behalf.

At this point, the most interesting question is whether we will now have to wait until the “end of the first quarter” or later to hear more about LightSquared’s plans to move forward, beyond the fact that it has exercised its Phase 2 option with Inmarsat to gain access to more spectrum in 30 months time. Even if the “end of the first quarter” is the timeline on which T-Mobile plans to reach a decision, it is unclear whether LightSquared will wait that long, or if it will instead be able to announce additional partners and investors beforehand, which would help to build confidence in the achievability of its buildout timetable and that it does not expect GPS interference issues to hold up its plans. More importantly, an early announcement would demonstrate some of the alternatives available to LightSquared, in the event that T-Mobile ultimately decides to go elsewhere for its 4G spectrum, and perhaps could even provide some indication as to the potential value of LightSquared’s spectrum assets.

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