09.23.11

E ≠ mc²?

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 11:17 am by timfarrar

While physicists may now have shown experimentally that if you have almost no substance then the speed of light squared is no longer a constant, LightSquared itself has demonstrated that repeatedly in recent months, as it has shifted from one deadline and plan to another.

Yesterday, at the Goldman Sachs Communacopia Conference, LightSquared’s CFO and CMO presented yet another version of their plan to potential investors, suggesting that after they have produced a prototype filter and have completed the general navigation retest by November 30, they would then get the go ahead from the FCC which would allow them to raise additional funding at the end of this year or early next. LightSquared also stated that it has committed “up to $50M” for federal precision devices to be replaced or retrofitted (though it does not intend pay to fix commercial devices, which LightSquared suggests will cost $50-$300 to fix, though Javad indicates the actual cost will be $300-$800 for their own devices). LightSquared would then go to market with a single 10x10MHz channel, which would provide sufficient capacity through 2015, and would give plenty of time “to engage” over using the rest of their spectrum. Of course, the implication from LightSquared’s statement that it is funded “into 2012″, is that they will run out of money in the first quarter of 2012, as I indicated in my recent assessment, and that (as LightSquared also indicated) they cannot raise funding until the GPS issue is resolved.

The testing and deployment plans stated above will cause further heartburn in the GPS community and at the DoD in particular (and it is notable that the Air Force Chief of Staff and other colleagues are standing firmly behind Gen. Shelton, who was pretty much accused of lying by Mr. Falcone in his recent Fox News interview). LightSquared still seems to be insisting that production of a prototype filter is sufficient, and that this can be tested before November 30 (although they did not even mention specifically that it would be tested), despite the statements in the NTIA letter of September 9 that testing “need not be complete” by November 30. LightSquared is also is saying that it intends to use the upper part of the L-band in less than 5 years time, which would render the filters they are proposing worthless, and of course until this issue is resolved, it is not even clear that there is any point in testing the new filter.

One under-appreciated point in the debate over “precision GPS” devices is that there appears to be a complete mismatch between LightSquared’s definition of a precision device (repeated in the Goldman Sachs presentation) as one that receives a satellite augmentation signal (such as the survey equipment used by the Army Corps of Engineers) and the DoD and PNT’s definition (as used in the TWG) which includes other non-augmented wideband GPS receivers, such as those used in “advanced scientific and research applications” and “precise location and targeting” by the DoD (which certainly doesn’t rely on augmentation by a commercial service). Of course that is a dramatically different scope both for future testing and for the need to develop a filter in a huge range of different form factors, and helps to explain both the Save Our GPS Coalition’s assertion that “this is not a one-size-fits-all situation” and Gen. Shelton’s assessment that the cost of fixing the problem would be in the “billions of dollars” and would take “a decade or more”.

UPDATE: Michael Marcus remarks in his blog that he believes Gen. Shelton’s concerns are exaggerated, noting that if LightSquared is a major threat to national security then there is a serious problem with the “extreme fragility of military GPS systems” and suggesting that “More likely, however, is that the proposed system will have no impact on military users…”. Of course the debate has moved on from a purely technical one to become a major political issue (not least because President Obama used to own stock in SkyTerra) and its likely that these technical subtleties will be largely lost in the noise at this point in time.

At this point in time, confidence in LightSquared appears to be ebbing by the day (at least as evidenced by their first lien debt, which I’m told is now trading at 60 cents on the dollar, down from near par in June and is “worth keeping an eye on…as a proxy for gauging investor confidence in Falcone and his telecom dream”). However, that’s hardly surprising when their story on the GPS interference issues doesn’t come anywhere close to holding together under scrutiny, and it is far from clear whether their spectrum assets will ultimately have any value at all.

3 Comments »

  1. ORBITRAX said,

    September 23, 2011 at 6:17 pm

    ” LightSquared itself has demonstrated that repeatedly in recent months, as it has shifted from one deadline and plan to another.”

    It appears that somewhere between the 14 Billion dollar “Greenfield” network “plan”, versus the new 9 Billion piggyback on the Sprint Network “plan”. That somewhere we lost the “Rural Card” that Lightsquared toted around as waiver “justification”.

    Democratizing Broadband.

    http://www.lightsquared.com/uncategorized/serving-rural-america/

  2. timfarrar said,

    September 23, 2011 at 6:58 pm

    Actually I’m told that the $14B was not actually what they planned to invest but also included Harbinger’s past investment in the company (stated as $4B elsewhere, but that may not include the $2.3B of additional funds they have raised in the last 15 months). The $8B is apparently what they now plan to spend in the future (I believe the $9B contract for Sprint is over a slightly longer period).

  3. TMF Associates MSS blog » See you in court… said,

    October 6, 2011 at 12:02 pm

    [...] hundred million dollars” and “isn’t actively raising funds”, because as LightSquared admitted at the Goldman Sachs conference last week, they need an FCC approval before any more money can be raised (and even then would need to raise a [...]

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