08.09.11

Throw ‘em under the bus?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 3:07 pm by timfarrar

It seems from today’s unexpected press conference that the FCC Chairman has finally realized that there is no way to avoid the fact that the GPS interference issues are a showstopper, and he is now preparing the ground to basically throw LightSquared under the bus. In particular the FCC is now characterizing the January waiver as a “stop work” order, stating that there is “no timetable” for the review (despite LightSquared’s recent insistence that it was “confident that the FCC will green-light its plans in mid-September”) and suggesting that there will now be more testing of the lower band plan, while use of the upper band will not be “happening anytime soon.”

Judging from these comments, my best guess is that there will now be six more months of testing on the lower band proposal (lasting into the spring or early summer of 2012, depending on how long it takes to issue the ruling), and a final decision could plausibly be deferred until after next year’s Presidential election (in order to avoid a political battle with the farming lobby). In addition, I suspect that even if LightSquared (assuming it is still around) received approval at that time, there could still be a delay of several years for precision users such as farmers and surveyors to modify their equipment before the lower band was brought into use.

Of course the reason that LightSquared had insisted on a mid-September approval is that it needs to raise additional funding before it can move forward with the Sprint deal, and as noted in Sprint’s 10-Q, there are “contingencies related to possible interference issues” in the network hosting agreement which give Sprint the right “to terminate the arrangement if certain conditions are not met either by September 30, 2011 or December 31, 2011.” However, this would apparently involve giving back LightSquared’s prepayments, so it seems more likely that the agreement would be “terminated for LightSquared’s material breach, non-payment or insolvency” in which case “Sprint maintains a second lien on certain of LightSquared’s spectrum related assets” (though that may be worthless) and presumably can also keep any payments made by LightSquared. Unfortunately, as stated today, although the FCC “would be sensitive to the financial situation of LightSquared’s owner, Harbinger Capital … that would not affect how it came to its decision on how to proceed” and FCC officials “insist they never told LightSquared the review would be completed by [mid-September].”

On the other hand, this morning, DISH stated that it plans “to make a mobile broadband play with its recently acquired S-Band satellite spectrum” and it intends to play a “significant role” in the wireless industry. When asked if DISH would reveal its strategy as soon as the Sprint announcement on October 7, DISH cautioned that they “wouldn’t expect anything in the near term.” Thus it seems that with LightSquared now left hanging, and the stock prices of Sprint, MetroPCS and Leap all suffering badly after their Q2 results, DISH is in an increasingly strong position, and may want to take more time to obtain the best possible terms for the partnerships needed for its wireless strategy. However, if that is the case, it is harder to see what might be a plausible “fourth chapter” for Sprint’s wireless strategy in early October, and it is always possible that DISH’s comment could be intended to put pressure on Sprint to offer them a better deal.

4 Comments »

  1. krbarker said,

    August 10, 2011 at 3:45 pm

    The update today is that Julius Knapp, head of the FCC Office of Engineering and Technology, asked for more testing on the new carrier plan, and which devices LightSquared was interfering with. We all expected the more testing, but the second part of the question was interesting. I looked at a small part of the TWG data (see my blog, http://www.questinygroup.com/qgi-blog), and it showed a wide range of performance across the receivers. In addition, the TWG randomized the nomenclature of the receivers so that they could not be correlated to manufacturer (understandable). However, that meant that I could not correlate the performance to the receiver characteristics. Now the FCC seems to be asking for exactly that albeit for the new carrier plan. It will be interesting to see how LightSquared and the GPS Coalition respond to this, and as you point out, the impacts on LightSquared’s deal with Sprint.

  2. TMF Associates MSS blog » Start planning now… said,

    September 7, 2011 at 8:20 pm

    [...] as I suggested a few weeks ago, it definitely appears that LightSquared will be consigned to a period of additional testing for [...]

  3. TMF Associates MSS blog » Beware the Ides of September… said,

    September 14, 2011 at 8:26 am

    [...] the FCC hinted back in August that it might be preparing to throw LightSquared under the bus, today’s Public Notice clearly indicates that the FCC has lost all patience with LightSquared [...]

  4. TMF Associates MSS blog » LS in Wonderland said,

    November 18, 2011 at 5:29 pm

    [...] LightSquared would be experiencing “headwinds” because the FCC Chairman was about to throw LightSquared under the bus, with his announcement on August 9 that he would not permit LightSquared to operate until [...]

Leave a Comment

You must be logged in to post a comment.