02.16.11

The man with no names

Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 11:25 am by timfarrar

Its curious that LightSquared’s Chief Marketing Officer has now disclosed that the company has “agreements with five customers to provide wholesale fourth-generation service” consisting of “a national retailer, a device manufacturer, one Web site, and two carriers”, but declined to name those customers “because the agreements aren’t yet public”. That doesn’t sound like a huge advance from last October, when LightSquared said it “is in advanced negotiations with a dozen partners — “we are exchanging term sheets with them” — and has signed up others, but has been forbidden from naming them” and certainly nothing like the major announcement that many observers, including myself, had been led to expect.

UPDATE: LightSquared has indicated in another article that it “has an agreement with a major retailer that it will name before the end of March” and it “has signed wholesale deals with two U.S. operators and [is] in discussions with three more”.

Interestingly, LightSquared also indicated that “We’re not going to raise more [money] in the short term” because “The company has sufficient funding for the immediate future and will seek more as it achieves network buildout targets”. However, this funding is now stated as “about $1.75 billion in debt and equity”, which is less than the “more than $2 billion in equity and debt proceeds and in commitments” that LightSquared indicated in a press release last October.

LightSquared’s network buildout targets are now to “begin network trials this year in Las Vegas, Baltimore, Denver and Phoenix after completing testing in a lab in the Dallas area” which appears to represent a slowdown from the previous target to “trial the network in the first half of 2011 and launch commercial service in the second half”. Indeed Harbinger told the FCC last March that “Service will begin in two trial markets, Denver and Phoenix, with a commercial launch before the third quarter of 2011 providing service to up to 9 million POPs”. The FCC’s January 2011 Waiver Order, also mandates that “LightSquared shall ensure that integrated, dual-mode MSS/ATC-capable L-Band devices are readily available in the marketplace no later than September 30, 2011, for datacards and no later than the June 30, 2012, for smartphones” (although this does not necessarily require LightSquared to have an operational terrestrial network at that time). Apparently confirming this delay, Nokia Siemens Networks indicated this week that “LightSquared’s deployment, however, won’t get in high-gear until next year, assuming it gets fully funded, at which points NSN’s North American revenue picture could take a dramatic turn” (though that seems to me to be a suprisingly non-committal statement from a partner with a $7B contract).

Overall, today’s report appears to confirm my supposition last week, that LightSquared and Clearwire may now have to wait while T-Mobile takes its time to reach a decision on 4G spectrum. Let’s hope therefore that the fistful of dollars from Harbinger’s sale of its remaining shares in Inmarsat are enough to achieve LightSquared’s current “network buildout targets” and convince T-Mobile to choose LightSquared as its 4G network partner. However, with just one key potential partner, and at least three possible choices, I wonder which of DBSD/TerreStar, Clearwire and LightSquared will ultimately turn out to be the good, the bad and the ugly.

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