05.10.12

Up, down, spin around?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 6:50 pm by timfarrar

What a bizarre day in the world of LightSquared, where it appears nothing is ever as it seems! First of all, a comment yesterday on my last blog post gave some hints as to a completely different way to think about why Charlie Ergen might be interested in acquiring LightSquared’s spectrum, despite the current roadblock imposed by GPS interference concerns. Specifically, why couldn’t LightSquared’s L-band MSS spectrum be repurposed as uplink-only spectrum and then paired with the DISH 2GHz spectrum, which could all be converted to downlinks (a proposal already made in the FCC’s 2GHz NOI)? Then Ergen would have access to a total of up to 80MHz of spectrum which could be authorized for terrestrial use (four 10MHz uplink blocks in the L-band and two 20MHz downlink blocks in the 2GHz band).

As I pointed out in my reply to that comment, there are certainly some GPS interference concerns expressed by the NTIA over handsets operating in the portion of the L-band uplink closest to GPS (1627.5-1637.5MHz) and presumably these concerns would be considerably greater for uplink use of the 1545-1555MHz block because it is even closer to GPS. It would also be very hard to develop handset filters which could comply with the onerous ATC out of band emissions limits above 1559MHz (something that is easier to address for downlink use on a tower, where physical size and power requirements are less of a constraint), presenting further issues for uplink use of the 1545-1555MHz block. However, even if these two bands were dropped from the initial deployment plan and only three of the four bands were used eventually, DISH could still benefit hugely from having access to 40MHz of downlink spectrum instead of 20MHz. Indeed DISH might even be able to sell off or lease some of this spectrum to another operator and still build a network.

This guesswork seemed to be supported by LightSquared’s April 25 letter to the FCC, asking for the L-band to be addressed within the 2GHz NOI, so that “cross-band” solutions could be considered. The counter-argument is that any such change would obviously delay the process of authorizing and then building out DISH’s network considerably (most likely by 1-2 years), and therefore might not be acceptable to either DISH or to the FCC Chairman (assuming he is focused on maximizing the speed with which the 2GHz spectrum is brought into terrestrial use).

However, later in the day, news emerged that Harbinger and the debtholders have agreed on a change to the First Lien Debt Agreement, adding DISH specifically to the list of Disqualified Parties who are not allowed to purchase the debt (this section previously just referred generically to strategic purchasers). That would suggest Harbinger are not interested in some form of accommodation with DISH along the lines of the above “cross-band” spectrum pairing.

Even more bizarrely, I have had people insisting to me that it is definitely not DISH who is the purchaser, and Ergen is not formally denying an interest simply because he wants the LightSquared debtholders to be even more confused about his intentions, while he moves ahead with his plans in the 2GHz band. It was indicated to me that various people have already been spreading misinformation, for example when the WSJ was told that Falcone had agreed to step down (which I’m told he hadn’t), and when the New York Post was told that Falcone had not been presented with an economic proposal by the debtholders (which I’m told he had). According to this version of events, the New York Post story that “Ergen bought the debt” is similarly misleading and may even have been encouraged by Falcone and his advisors in order to persuade investors that there is strategic value in the spectrum. Of course that version of the story might just be wrong as well.

At this point what we do know is that Sound Point has a deep pocketed backer who is trying to acquire a significant amount of the LightSquared debt. If it’s not Ergen, then it is very hard to understand who would have a strategic interest in the spectrum at anything close to the price they are paying. We don’t know the intentions of the buyer, but it seems that they are probably not friendly towards Harbinger and would presumably therefore seek to force LightSquared into bankruptcy on Monday when the waiver expires. Whether they will gain support from other debtholders in doing that remains unclear, but it does seem that Falcone’s threat of a voluntary bankruptcy may not be give him as much power to dictate the outcome of this week’s negotiations as first thought. Most people certainly seem to think that another extension of the negotiations beyond next Monday is fairly unlikely and a resolution one way or another will be reached by then.

As a result we seem set for another few days of briefing and counter-briefing, in a situation where almost no-one knows who is telling the truth and who is bluffing. With $1.6B of debt and billions more in equity at stake, it really is going to be a game of high stakes poker this weekend.

7 Comments »

  1. Argo4288 said,

    May 11, 2012 at 4:12 am

    What about the possibility that Ergen wants the LightSquared spectrum so that he can consolidate satellite uses in other bands into the L-band and then convert that other satellite spectrum into terrestrial spectrum? Ergen is smart enough to know that DoD and DoT won’t allow any terrestrial uses in the L-band in the foreseeable future. Perhaps he sees LightSquared as an opportunity to buy satellite spectrum on the cheap and clear out other satellite bands.

  2. timfarrar said,

    May 11, 2012 at 7:43 am

    Ergen and the FCC are already intending to convert the 2GHz MSS band to terrestrial, because there is little to no value in being a new entrant satellite service provider, in a small, highly competitive market. There is no 2GHz usage to “consolidate” into the L-band, and there is no rationale for moving Big LEO band users (the Big LEO uplinks are close enough to GPS to still cause problems, and if you want to use the S-band downlinks you can go ask Globalstar: any barriers to use of that spectrum are nothing whatsoever to do with Globalstar’s existing satellite users). Fundamentally it would be pointless to spend $1B+ to buy LightSquared simply to offer satellite service.

  3. Deal or die time for LightSquared; Will Dish swoop in? — Broadband News and Analysis said,

    May 13, 2012 at 2:11 pm

    [...] little, but satellite broadband analyst Tim Farrar thinks there may be one interested party: Dish. In his blog, Farrar wrote that Dish might seek to pair its own S-band satellite frequencies with [...]

  4. Deal or die time for LightSquared; Will Dish swoop in? | TechDiem.com said,

    May 13, 2012 at 3:31 pm

    [...] little, but satellite broadband analyst Tim Farrar thinks there may be one interested party: Dish. In his blog, Farrar wrote that Dish might seek to pair its own S-band satellite frequencies with [...]

  5. It’s official: LightSquared goes bankrupt — Broadband News and Analysis said,

    May 14, 2012 at 11:22 am

    [...] may be one exception. As TMF analyst Tim Farrar postulated in his blog, Dish Network might have a way of cleaning up LightSquared’s spectrum. Dish owns S-band satellite [...]

  6. LightSquared Bankruptcy Triggers DISH Spectrum Purchase Speculation Telecompetitor said,

    May 15, 2012 at 8:07 am

    [...] idea of how DISH might use the spectrum apparently originated in a blog post penned by Tim Farrar, a satellite broadband analyst with TMF [...]

  7. TMF Associates MSS blog » How many billionaires does it take to screw in a LightSquared? said,

    May 24, 2012 at 3:12 pm

    [...] In my last post, I noted the skepticism of some observers about whether Charlie Ergen was really behind Sound Point buying $350M of LightSquared’s first lien debt, despite one potentially logical technical solution that could combine LightSquared’s spectrum (as uplinks) with the TerreStar and DBSD spectrum (if that was all converted to downlinks). Indeed LightSquared itself proposed to the FCC last week that the 2GHz spectrum could be used for its downlinks as one of the options for a spectrum swap and suggested in its comments in the DISH AWS-4 proceeding that the FCC should redesignate DISH’s 2GHz uplinks as downlink spectrum. [...]

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