02.15.12

I have a cunning plan…

Posted in Financials, Inmarsat, LightSquared, Operators, Regulatory, Spectrum at 5:48 pm by timfarrar

After a very eventful day, Mr. Falcone is claiming that he has a cunning plan and that bankruptcy “is clearly not on our table”. However, it certainly appears to be on the mind of LightSquared’s investors, who are laser-focused on stopping the $56.25M payment to Inmarsat, which is expected to be made on Tuesday next week, after the President’s Day holiday. Under pressure from investors (and UBS), LightSquared has now reportedly hired restructuring advisers from Moelis and Company, but it appears that Mr. Falcone is actively resisting UBS’s entreaties that the best way forward would be to file for bankruptcy and stop LightSquared’s cash draining away. Indeed it appears that LightSquared may have cash expenses totaling nearly $200M between now and early April, of which the vast majority would go to Inmarsat. If Mr. Falcone continues to resist then I suspect the next step may be for Mr. Icahn and others to initiate a rather more public dispute with Harbinger.

Part of this cunning plan may be to seek a spectrum swap for part of the AMT band (1515-25MHz), which LightSquared reportedly pitched to the DoD last month, despite the “extremely formidable difficulties” this would entail. Of course it is hard to see why the DoD would want to give up this spectrum, when it seems implausible that they could use the L-band satellite spectrum for these terrestrial operations instead, and being directly below the 10L block, it is not a foregone conclusion that there would be no interference to GPS. As a result, that element of the plan does not appear to be a particularly viable near term option.

The second part of the plan appears to involve trying to pressure the FCC into proposing some compensation for the supposed abrogation of LightSquared’s 2004 license. The FCC’s Public Notice doesn’t seem to actively discourage this view, complaining that no overload interference concerns were raised until 2010, and stating that:

“…although the GPS community raised overload interference issues in connection with the 2011 Conditional Waiver Order, the interference addressed by the NTIA Letter is associated with LightSquared’s planned terrestrial base stations rather than the mobile handsets at issue in the Conditional Waiver Order. Thus, the test results stated in the NTIA Letter appear to apply to the full LightSquared ATC service authorized in 2004 and 2010.”

On the other hand, the FCC is clearly being extremely careful from a legal perspective, and as the GPS industry have noted in the past, all ATC operations are subject to CFR 25.255, which states:

If harmful interference is caused to other services by ancillary MSS ATC operations, either from ATC base stations or mobile terminals, the MSS ATC operator must resolve any such interference. If the MSS ATC operator claims to have resolved the interference and other operators claim that interference has not been resolved, then the parties to the dispute may petition the Commission for a resolution of their claims.

It will therefore be very interesting to see how the FCC rules. With a comment deadline of March 1 and no reply comment period, it appears that the FCC wants to dispose of this matter quickly, though any ruling will certainly have to be very carefully written to withstand legal challenges. It seems that for the moment Harbinger are trying to keep their options open and hoping that either the DoD or FCC throws them a bone, before major payments are due at the end of March. However, it is inconceivable that a spectrum swap could be engineered in that time period and it hardly seems plausible that the FCC would proactively offer taxpayers’ money to LightSquared by way of compensation.

With respect to some of the other developments today, it is notable that Sprint are claiming they would only have to return $65M of the $310M that LightSquared had paid by the end of September. That is a big shock because I had assumed Sprint might return at least $200M to LightSquared’s creditors. If LightSquared remains determined to pay yet more money to Inmarsat and might only recover a small fraction of its advances to Sprint, then that is a very negative sign for LightSquared debtholders.

2 Comments »

  1. Serena said,

    February 19, 2012 at 2:02 am

    I wholly agree with your posts on this subject: It seems LS principals got themselves in something they hadn’t really figured out (experienced radio engineers are a very rare breed nowadays) and then resorted to tactics that couldn’t succeed.
    But I have read elsewhere that Tim Farrar has said that the value of LS spectrum is now about Zero. It’s possible, but IMO not certain:
    It’s the case if LS sticks to deployment of standard (FDD) LTE.
    But what about LS using the upper 20 MHz it has, which is not impacting GPS, to deploy a TD-LTE network (such as the one planned now by Clearwire?)
    It may have less capacity than an FDD network, but still, the spectrum would be then valued at possibly up to 4 Billion USD, wouldn’t it?

  2. timfarrar said,

    February 19, 2012 at 6:31 am

    The NTIA test reports do show some concerns about interference from simulated handsets in the uplink bands. These would of course be magnified greatly by downlink operations at ~1500W compared to handsets at ~1W.

    In any case downlink operations in the uplink band are not permitted by current FCC rules and more importantly would not be allowed by Inmarsat because if the downlink signal happened to illuminate one of their satellites (which is looking for a much weaker signal from a satellite phone), it could overload and damage the satellite.

    As a result TD-LTE operations in the uplink band are simply not feasible

Leave a Comment

You must be logged in to post a comment.