The most expensive press release in the world?

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 3:21 pm by timfarrar

In recent days, CNET has reported that Sprint “will confirm its network-sharing agreement with LightSquared in conjunction with its earnings announcement on July 28″. However, today Sprint has indicated that details of their 4G story will not come until “this fall”. That fits with what I had been told about Sprint’s Network Vision announcement coming after the Q2 results. However, it does leave something of a puzzle as to what might be announced on July 28.

What I’m hearing now is that LightSquared apparently made a fairly substantial advance payment to Sprint (rumored to be $300M) a couple of weeks ago, in order to keep their agreement alive, and that is what will be disclosed on Sprint’s Q2 results call next week. This will give LightSquared more time both to get FCC approval, and presumably to raise the significant additional money needed to pay Sprint to incorporate LightSquared’s spectrum into the Network Vision rollout (which at the moment apparently baselines only an 800 and 1900MHz network).

It will also provide confirmation from Sprint, rather than just leaks from Harbinger, that there actually is an agreement (albeit highly conditional) under which Sprint would host LightSquared’s deployment. In addition, LightSquared will then be able to ramp up the pressure still further on the FCC for a quick, favorable decision (indeed LightSquared’s CEO is already indicating that he “isn’t planning for the possibility that the FCC denies LightSquared the waiver when the decision comes out in September”). Of course, for LightSquared’s first lien debtholders, it represents another $300M that they might struggle to recover in the event of a LightSquared default, and thus ties them even more closely into Harbinger’s plan.

If this rumor is true, then its not all all surprising that Sprint was happy today, because if LightSquared is unable to move forward, Sprint is getting paid $300M to do nothing other than put LightSquared’s name in a press release. However, in these circumstances, it will be very interesting to see whether Sprint answers questions about the terms of the agreement, including what deadline LightSquared will have to meet and what additional security and/or funding LightSquared will need to provide for Sprint to get started.

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