09.13.11

Beware the Ides of September…

Posted in Financials, Inmarsat, LightSquared, Operators, Regulatory, Spectrum at 4:20 pm by timfarrar

So this afternoon the FCC has joined with the NTIA in mandating further tests for LightSquared. Though the need for further testing was hardly a surprise after yesterday’s NTIA letter, what comes as a huge shock is that the FCC has offered LightSquared absolutely nothing to indicate it is minded to approve LightSquared’s terrestrial operations in the future. In particular, the FCC has not set out any timetable for completion of the additional testing (although it has stated that the “interference concerns” include “certain types of high precision GPS receivers, including devices used in national security and aviation applications”), or even specified what testing is required (and recall that the NTIA basically said for precision devices “come back when you have made a filter and we’ll think about more testing then”).

Although 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 and no longer believes that it is a viable near term option for creating additional competition in the wireless market. Thus perhaps Mr Falcone’s next call to the FCC Chairman ought to involve a bit of Shakespeare: Et tu, Julius?

After this ruling, the LightSquared rollout must now be regarded as being suspended indefinitely, and its hard to see where the company (and Harbinger) goes next. My best guess is that it will end up like Iridium back in 1999, where after a few months of utter panic in the spring of 1999, there were three distinct stages to the bankruptcy. In the first stage (lasting about six months), the company and its advisers claimed that the assets were still worth billions of dollars and all they needed was a bit more money. In the second stage (lasting most of 2000), they realized that wasn’t true and struggled even to find a bidder who was willing to pay pennies on the dollar (Iridium sold for $25M after investing $5B in its network). In the third stage, the creditors then spent years suing whoever they could (in that case Motorola) to try and recover their losses.

In this case, while it may take a couple more months before we finally see the end game emerge, its hard to see why anyone is going to fund the enormous costs necessary to keep the LightSquared plan on track, including the ongoing payments to Inmarsat (and perhaps to Sprint as well) for very long in the face of a completely undefined timetable for resolution of the outstanding issues. Its equally hard to see who, other than Inmarsat, might buy these assets, and even then the price would likely be only a few hundred million dollars at best (assuming Inmarsat justifies such an acquisition based primarily on a satellite-based business plan). Then, no doubt, there will be litigation against whoever can be blamed (which of course is why the FCC is being so careful to protect itself in the Public Notice).

3 Comments »

  1. TMF Associates MSS blog » Absolutely lacking in credibility… said,

    October 28, 2011 at 4:33 pm

    [...] tests by Alcatel-Lucent Bell Labs, though of course those will not carry any weight in the testing process mandated by the NTIA and FCC. However, it is hard to see how LightSquared can claim that “These solutions will undergo [...]

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

    November 19, 2011 at 2:48 pm

    [...] I also remarked on). Then in mid September, it became clear, after the FCC’s Public Notice mandated further testing, that everyone in government (and apparently the FCC) would “distance” themselves [...]

  3. TMF Associates MSS blog » Get your spectrum here…or not… said,

    January 20, 2012 at 11:37 pm

    [...] be very busy trying to avoid that situation. As a result, we might well see the same outcome as in September, when the release of the NTIA letter was followed very quickly by an FCC response (which in that [...]

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