Five minutes to midnight?

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 12:06 pm by timfarrar

As I noted last week, it appears that the FCC ruling on LightSquared is expected to be released very soon, and two more developments have now provided support for this assessment. Firstly, today’s bankruptcy court hearing on exclusivity and executive bonuses was postponed until October 1 at the request of LightSquared’s debtholders. It would be logical to conclude that this postponement came because the debtholders expect an FCC ruling to emerge before the end of this month, after which time they will be in a much stronger position to argue that LightSquared’s existing management (and Harbinger) should not retain control of the bankruptcy process.

After an FCC ruling (presuming it is negative), it would be clear that a little progress could be achieved during a 5 month extension of exclusivity as LightSquared requests, because the ruling would trigger litigation which would undoubtedly last for many years. Instead the debtholders want to “force Mr. Falcone to put his money where his mouth is” and either hand over the company to them (via an auction where they could credit bid their holdings), or pay off the debtholders at par in order to retain Harbinger’s ownership of the company.

Secondly, news has emerged today that the House Energy & Commerce committee plans to hold a hearing on LightSquared next Friday, September 21, which can be expected to focus on criticizing the FCC’s role in rushing through the LightSquared waiver. As a result, it seems highly likely that the FCC will now move to release their LightSquared order next Thursday evening in order to deflect this criticism and show that their process “worked”.

Of course, its hard to imagine the FCC order doing anything other than confirming their February proposal to withdraw LightSquared’s waiver and ATC authorization (indeed people like Gen. Shelton are already taking that for granted), but if comments from House Republicans focus on blaming the FCC for LightSquared’s losses, then that could be helpful to LightSquared’s PR campaign for a spectrum swap or other compensation. Nevertheless, if the result of the November Presidential election is an Obama win, then after the political backlash caused by the developments of the last two years, it seems unlikely that any such settlement would be forthcoming. So I guess Mr. Falcone will be voting Republican this time around.

UPDATE (9/20): The FCC testimony for tomorrow’s hearing appears to place the entire blame for the LightSquared debacle on the GPS industry, creating a whole new range of possibilities for how the hearing might develop. If the Committee joins the FCC in this blame game, then that would increase the likelihood that the FCC might offer LightSquared access to some alternative spectrum for a limited period on favorable terms, while receiver standards efforts move ahead in the L-band. However, that approach would also remove any potential legal liability from the FCC, and it is highly implausible that LightSquared would be able to sue the GPS industry for damages for not raising concerns at an earlier date.

As a result, LightSquared’s fate now seems more likely to become entangled in a political rather than a legal process. The FCC also seems determined to delay any ruling further and if the ruling is delayed until after the November election then that would also open up the possibility of throwing LightSquared a bone while limiting the political fallout. However, it still remains far from clear whether there is any spectrum block available that could offer LightSquared sufficient spectrum to pursue additional fundraising and buildout a network, or even allow LightSquared to sell its assets and repay the $2B+ of outstanding debts.

1 Comment »

  1. TMF Associates MSS blog » PCASTing around for a solution? said,

    September 24, 2012 at 4:05 am

    [...] & Commerce subcommittee hearing last Friday certainly came as a surprise to many observers, including myself, with their emphasis on blaming the GPS industry for not raising concerns at an earlier date. [...]

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