06.27.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:00 am by timfarrar
Last week’s Brattle Group report for LightSquared, not only highlights the regulatory “gift” from the FCC involved in their January 2011 waiver, but also contains an estimated value of $12B for LightSquared’s L-band spectrum. This valuation is derived by assuming that LightSquared’s terrestrial-only waiver means its spectrum should have an equivalent value to “unencumbered AWS wireless broadband spectrum”, which Brattle believes to be worth approximately $1.00 per MHzPOP.
Unfortunately, this valuation, which is derived from an April 2011 Brattle Group analysis, is also deeply flawed. As an aside, it is almost identical to the valuation put on LightSquared (then MSV) by Brattle back in October 2005, when they estimated that 30MHz of MSS-ATC spectrum had a “potential” value of $0.99 per MHzPOP (although ironically, at that point it was asserted that “there are questions regarding interference and other technical issues that potentially make L-band use for ATC problematic, which would require L-band spectrum to be priced at a discount to S-band spectrum”).
The most obvious problem with Brattle’s valuation of LightSquared’s spectrum is that is is just as inappropriate to use AWS spectrum as the sole benchmark for L-band valuation today, as it was to use PCS as the benchmark in October 2005. Today the AWS-1 block has substantial existing infrastructure already deployed (both base stations and handsets) which can readily make use of the spectrum, whereas LightSquared was not even able to provide test handsets or full power base stations for the recent Las Vegas testing.
In addition, there are also more subtle issues which render the AWS value in the April 2011 paper unreliable. Notably, Brattle estimates trends in spectrum pricing by reference to a spectrum price index created and maintained by Spectrum Bridge. Brattle suggests that the index “tracks changes in spectrum value reasonably well” because as one example, “the change in SpecEx Index values closely tracked the change in AWS spectrum value based on NextWave’s AWS spectrum sale to T-Mobile in July 2008. The NextWave sale reflected a 91% increase in AWS spectrum value, whereas, the SpecEx Index in the same period indicated an 86% increase in spectrum value.”
However, the cited transaction reflects the sale of spectrum which by July 2008 could be readily put into use in T-Mobile’s built-out AWS-1 network, compared to spectrum which in summer 2006 had not even been cleared of interference. It is as if I bought some farmland and then a developer put in utilities and roads on the adjacent tract of land. The value of my particular plot might have increased, but that would say nothing about the market price of farmland. In spectrum terms, no-one (including Brattle) would suggest that Aloha’s windfall on sale of its 700MHz spectrum to AT&T was largely due to a general increase in the value of spectrum, as opposed to the DTV transition and the 700MHz auction creating certainty about whether the spectrum could be put to use.
A second factor is that of survivorship bias: in the cited NextWave transaction, NextWave’s AWS holdings were sold because the offered price was acceptable (higher than the original price paid), but NextWave failed to sell its 2.3GHz and 2.5GHz spectrum holdings which were on offer at the same time (because the offers, assuming there were any, were too low). Spectrum Bridge claims that its index takes account not only transaction data but also a “custom weighting of value, spectrum, and macro-economic based factors driven by SBI’s valuation and trading data”. However, this inevitably obscures the methodology and makes it all but impossible to determine whether the index accurately tracks spectrum values.
Returning to my farmland analogy, it would seem that the most important factors in attempting to exclude both “improvement” and “survivorship” bias would be that (for currently unused spectrum) the ecosystem for use of the spectrum should not have changed dramatically in the intervening years, and the timing of the sale should be dictated by external events (e.g. a bankruptcy auction) rather than by whether or not the prior holder can make a profit over what it paid previously. In that context, the recent sale of DBSD and the current auction of TerreStar almost certainly provide a better indicator for trends in the value of LightSquared’s spectrum than the index used by Brattle.
At current levels (of roughly $0.25 per MHzPOP), DBSD and TerreStar’s spectrum has actually gone down in value compared to 2005 and is broadly similar to the trading price (and the Motient/SkyTerra exchange valuation) back in 2006 (before most of their satellite construction expenses were incurred and well before the spectrum could be brought into use). This compares to a SpecEx index which has doubled since mid 2006 and trebled since 2005.
If (perhaps optimistically) we assumed that LightSquared’s spectrum with the terrestrial-only waiver is similar to AWS-1 spectrum when it was auctioned in 2006, then based on the DBSD/TerreStar trend (of minimal change in price since 2006) the AWS-1 auction pricing ($0.54 per MHzPOP) might be an appropriate valuation to use. On the other hand, if DBSD and TerreStar also include in their current valuation some allowance for the possibility that the FCC might also grant them a waiver (so are more directly analogous to LightSquared), then their $0.25 per MHzPOP valuation might be more appropriate.
In order to come up with an actual dollar valuation of LightSquared’s spectrum assets, you then need to take into account the impact of interference (i.e. whether to use 20MHz or 40MHz as the basis of valuation) and the NPV of the Inmarsat payments (where a relatively low (8%?) discount rate would probably be used by any established wireless operator purchasing this spectrum).
At the low end (20MHz @$0.25 per MHzPOP), you come out with a negative valuation after the Inmarsat payments (minimal value for the first lien debtholders), whereas at the high end (40MHz @$0.54 per MHzPOP) you have a valuation of about $4B (before paying off the first lien debt). That’s why I said that “It is very hard to see how you justify an equity value for this business (in line with) what Harbinger has invested, unless it can show it will be able to use all the spectrum it owns”.
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06.14.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 3:32 pm by timfarrar
News emerged on Tuesday afternoon that TerreStar Networks (TSN) was close to agreeing a $1.2B to $1.4B stalking horse bid with DISH Networks. It appeared that DISH is likely to outbid a group of first lien debtholders and another bid from MetroPCS (possibly in conjunction with Harbinger), who jointly bid for DBSD with Solus and Harbinger back in March and were also outbid by DISH in that auction.
UPDATE: It has been confirmed to us that Harbinger was one of the parties attempting to acquire TerreStar’s spectrum assets, but its not clear whether Harbinger was aligned with MetroPCS or the other first lien holders (and it may even have been a potential customer/partner for both groups).
It seems that Harbinger had hoped to be in a position to announce a 2GHz first strategy, just as it planned back in March, in an attempt to head off the findings of tomorrow’s GPS Working Group report to the FCC which will state that testing demonstrated “widespread interference with GPS.” However, once again Harbinger may now have been thwarted by DISH.
UPDATE: Details on the agreed $1.375B stalking horse bid have now been filed with the Court. It is stated that the bid amount will exceed the secured debt (15% Notes plus PMCF plus DIP) by $90M. Thus the Exchangeable Notes (nearly $200M) and other unsecured creditors will have to make do with well under 50 cents on the dollar and no value would flow down to the equity holders in TSN (which is owned 88% by TerreStar Corporation and 12% by LightSquared). For these unsecured creditors to be paid in full and excess value to flow to the TSN equity would therefore require the winning bid in the auction to be increased to something between $1.5B and $1.6B (rather higher than I had previously estimated). Of course the disappointed equity holders (in TSN and by extension in TSC) may have some company, because at the current $1.375B bid level, Harbinger will also take a bath on its majority holdings of Exchangeable Notes, which it was buying at up to 82 cents on the dollar back in November.
Whether further bids might emerge in the subsequent auction is still unknown. The other first lien debtholders may be content to be paid in full in cash for their claim, though there were indications last night that they were still actively competing against DISH as the price rose towards $1.4B. Perhaps MetroPCS (and Harbinger?) could also try to outbid DISH in the auction itself. Unfortunately, that didn’t work in the DBSD case, and it could well be the case that no further bids emerge at the auction, given the protections that the successful stalking horse bidder will have.
If Harbinger is unsuccessful in securing rights to TerreStar’s 2GHz spectrum, its unclear where Harbinger and LightSquared go from here, unless Sprint is prepared to take LightSquared’s side in the GPS interference debate. However, if Harbinger did in fact team up once again with MetroPCS, that would make it harder to believe that a deal with Sprint is anything like as imminent as LightSquared has been hinting.
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05.31.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:08 pm by timfarrar
Although Charlie Ergen has his Seinfeld strategy for exploiting DISH’s new assets, including DBSD and Blockbuster, Harbinger’s plans for LightSquared are becoming ever harder to discern, with news today that LightSquared is “considering a deal with AT&T to buy network capacity from the carrier”. Presumably this story comes in response to concerns that LightSquared might be forbidden from operating its L-band terrestrial network indefinitely, if new language in the National Defense Authorization Act passed by the House of Representatives last week is ultimately included in the final bill. At the very least it now appears that the FAA will insist that LightSquared’s operations be confined to only the lower half of its 40MHz of L-band spectrum, while John Deere contends that “permitting LightSquared to operate its network as proposed or any variant of its currently proposed network will create massive interference into Deere’s StarFire system and other similar systems risking serious harm to the U.S. agriculture industry”.
This news marks yet another 180 degree turn in LightSquared’s ever-changing story, which over the last year has shifted from a $7B contract (or rather MoU) with Nokia Siemens Networks (which disintegrated in January) to a joint bid with MetroPCS for DBSD to a network sharing agreement with Sprint (which at one point was supposedly even going to supplant Clearwire) to now an “initiative” with AT&T, along the way apparently including talks with Cablevision, Time Warner Cable and any number of other companies. This extraordinary saga reads like something by Hans Christian Andersen, the only question being whether the final tale will turn out to be “The Ugly Duckling” or “The Emperor’s New Clothes“.
Meanwhile, the FCC appears to be doing its best to make the TerreStar bankruptcy auction even more confusing, releasing a Public Notice on May 20 which “invites technical input on approaches to encourage the growth of terrestrial mobile broadband services in the 2 GHz spectrum range”. Unfortunately for TerreStar, the FCC once again insists that “the public interest” requires that “any grant of terrestrial rights in the 2 GHz band [should] have ‘conditions designed to ensure timely utilization of the spectrum for broadband and appropriate consideration for the step-up in the value of the affected spectrum’” in the form of “Voluntary Incentive Auctions” or “Voluntary Return of MSS Spectrum Rights”, thereby potentially reducing the perceived value of TerreStar’s MSS spectrum in the upcoming auction quite significantly.
Of course, things are not looking that great for the FCC’s other attempts to bring additional spectrum into use for terrestrial mobile broadband (i.e. LightSquared and broadcast TV incentive auctions), so perhaps the buyer of TerreStar’s spectrum will simply tell the FCC to go pound sand, and continue to pursue a (loss making) satellite-based business plan until a better offer is on the table. However, in those circumstances, whoever buys TerreStar would need to have deep pockets, and be happy to wait for several years rather than seeking a quick flip of the spectrum. Given Harbinger’s experience with LightSquared, that might well put off some of the financial players who could otherwise have been interested in TerreStar’s spectrum.
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03.22.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 8:48 am by timfarrar
As I noted last month, I found it very surprising that LightSquared chose to announce that it had “five customers” for wholesale fourth-generation service, consisting of “a national retailer, a device manufacturer, one Web site, and two carriers”, but declined to name any of them. Over the last five weeks, two of these names have emerged – Open Range Communications and today Leap Wireless. However, LightSquared is still to reveal the “major retailer that it will name before the end of March”.
Just like the deal with Open Range ten days ago, when everyone thought LightSquared would announce a major deal with MetroPCS, today’s release also seems to be a major let down. LightSquared had promised everyone that it had a network sharing agreement with Sprint to announce at CTIA. Perhaps this will still be announced tomorrow, but that would be a rather peculiar PR strategy, and PR is one thing that LightSquared has been very effective at. Given the complex array of choices now facing Sprint, as it decides how to respond to the AT&T/T-Mobile deal, it seems more likely that Sprint has taken a step back to reconsider what happens next.
As I understand it, the Leap Wireless roaming deal was agreed six months ago, leading LightSquared to claim at the SATCON conference in New York in October that it had already secured a 3G roaming partner to “augment” its network coverage. It also hardly seems likely to generate a meaningful amount of revenue for LightSquared, especially if it is a reciprocal roaming agreement. If 30% of Leap’s 5.5M customers opted for 4G roaming, and the net revenue flow to LightSquared was $2 per sub per month, then this would only generate about $40M of revenues per year for LightSquared, a drop in the bucket compared to its planned $14B investment.
The second major LightSquared announcement that was expected at CTIA was a network infrastructure deal with Ericsson. Its therefore surprising that an interview with a LightSquared executive has been published today on Telecoms.com, once again talking about LightSquared’s “deal” with Nokia Siemens Networks. As an aside, I’m told that the reason it is always referred to as a “deal” or an “agreement” with NSN, is because the original MoU, signed last July, has never been converted into a formal contract.
In my previous post, I wondered “which of DBSD/TerreStar, Clearwire and LightSquared will ultimately turn out to be the good, the bad and the ugly”. Given the results of the DBSD bankruptcy auction, DBSD certainly turned out to be good for its investors. Now we just have to wait and see what happens with TerreStar, Clearwire and LightSquared.
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03.18.11
Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 12:58 pm by timfarrar
On Wednesday, the FCC Chairman gave a speech at the Mobile Future Forum promoting his plan to hold incentive auctions of spectrum “voluntarily contributed by current licensees like TV broadcasters or mobile satellite operators, who would in return receive a portion of the proceeds of the auction”. This comes at an awkward time in the debate over MSS spectrum, given that DBSD has just been sold and a resolution of the TerreStar bankruptcy is still to come.
With Harbinger’s bid for DBSD, many observers had assumed that 2GHz spectrum holders would be able to secure waivers of the ATC obligations just as LightSquared did, despite the FCC expressing its intention in last July’s NPRM to secure “appropriate compensation for the step up in value” generated by converting the 2GHz band to terrestrial spectrum. As a result, this injection of additional uncertainty can’t be good news for TerreStar’s investors as they seek bids for the company’s assets.
The FCC Chairman’s intention to treat 2GHz differently from L-band (apparently on the basis that L-band spectrum is “worse” than 2GHz because it will take a substantial amount of time and money to resolve the interleaving and interference issues) also draws more attention to the ongoing debate over the LightSquared waiver.
Earlier this week it was suggested to me by an Obama Administration official that the FCC’s actions in granting the waiver may have contravened the intent of the President’s spectrum policy, as laid out in a June 2010 memorandum. This Memorandum states the following:
Section 1. The Secretary of Commerce, working through the National Telecommunications and Information Administration (NTIA), shall:
(a) collaborate with the Federal Communications Commission (FCC) to make available a total of 500 MHz of Federal and nonfederal spectrum over the next 10 years, suitable for both mobile and fixed wireless broadband use. The spectrum must be available to be licensed by the FCC for exclusive use or made available for shared access by commercial and Government users in order to enable licensed or unlicensed wireless broadband technologies to be deployed;
(b) collaborate with the FCC to complete by October 1, 2010, a specific Plan and Timetable for identifying and making available 500 MHz of spectrum as described in subsection (a) of this section. For purposes of successfully implementing any repurposing of existing spectrum in accordance with subsection (a) of this section, the Plan and Timetable must take into account the need to ensure no loss of critical existing and planned Federal, State, local, and tribal government capabilities, the international implications, and the need for appropriate enforcement mechanisms and authorities;
Specifically, it was suggested to me that the FCC did not “take into account the need to ensure no loss of critical existing and planned Federal, State, local, and tribal government capabilities” with respect to GPS interference, because the waiver was granted before the issue had been fully addressed. This dispute appears to highlight an ongoing debate within the US government about how to balance the conflicting objectives of protecting GPS while increasing the availability of broadband spectrum, which has seen at least one senior officer speaking out against LightSquared. As a result, it will be interesting to see how the political debate evolves, in light of the ever-intensifying lobbying campaign from the GPS industry.
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03.16.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum at 7:20 pm by timfarrar
Back in the 1990s, the oft-repeated mantra from proponents of the Iridium, Globalstar and ICO projects, when asked where they would find subscribers and investors, was “build it and they will come“. Unfortunately, this Field of Dreams approach didn’t quite work out, when between them these projects lost over $12B of investors’ money.
It now looks like Phil Falcone may end up playing the role of another character from the film, and an even better known resident of Chisholm, Minnesota, Archibald “Moonlight” Graham, whose claim to fame is that he never managed to get a chance to bat in his only appearance in Major League Baseball.
At Satellite 2011 today, the consensus of industry observers and regulatory advisers alike was that GPS interference issues are likely to render much of LightSquared’s L-band spectrum unusable for years to come, as I noted last night. As a result, it is very hard to see where we go from here in terms of LightSquared’s network buildout, even if the plan was fundable.
UPDATE: LightSquared appears to be hinting that it plans to announce a network sharing deal with Sprint next week at CTIA. Though this would be an interesting development, it is a far cry from the planned deal with MetroPCS, which could have potentially ensured an ATC buildout in the 2GHz band. LightSquared would still have to raise the money to fund the buildout, and this will still cost billions of dollars, not least because Sprint only has the right to deploy majority owned spectrum (such as from Clearwire) on its leased towers (unless new agreements are struck with the tower owners). If GPS interference issues render much of LightSquared’s spectrum unusable, it will also be much harder to offer adequate security for any new fundraising.
After Harbinger’s unsuccessful attempt to gain control of DBSD, it may now prove difficult if not impossible to access the 2GHz spectrum. With MetroPCS apparently also unwilling to publicly announce its partnership with Harbinger, it appears more plausible that MetroPCS would decide to team up with DISH than to continue the pursuit of TerreStar in conjunction with Harbinger. As a result, it seems ever more probable that there may never be a LightSquared terrestrial network, and Mr. Falcone may have lost his chance to bat in the major league of mobile operators.
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03.15.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 8:24 pm by timfarrar
Yesterday at Satellite 2011, Harbinger’s bankers at UBS expressed enormous confidence that LightSquared was “ahead of the pack” in securing partners and in its future prospects. Given the ongoing auction for DBSD, I was not alone in finding that confidence somewhat surprising. However, the document filed by DBSD this morning summarizing the status and results of the marketing process helps to explain why that was the case. MetroPCS (referred to as the Alternative Bidder) had filed a tentative bid last Thursday which was “contingent on the completion of additional due diligence and securing sufficient financing” (because it had been unable to reach an agreement with Harbinger and Solus). This was the point at which LightSquared were forced to announce their deal with Open Range instead of the intended partnership with MetroPCS. However, on Sunday March 13, MetroPCS reached an agreement with Harbinger and Solus to jointly fund the bid, allowing the three companies to make a definitive offer ultimately amounting to $1.475B. This supposed “knock-out” bid was a major factor in allowing UBS to travel to Washington DC on Monday and advertise their confidence in LightSquared.
Unfortunately for Harbinger, late last night DISH made a higher bid of $1.485B for DBSD and secured the support of parent company ICO Global, knocking Harbinger out of the running (although there remains the remote possibility of a further bid). As a result, the plans of LightSquared are now subject to considerable confusion – will it focus on the L-band or will it instead bid for TerreStar?
As I noted last week, there are acknowledged problems with GPS interference in the L-band, which is apparently what forced Harbinger to bid for DBSD. I’m now told that this interference issue may well render LightSquared’s current L-band spectrum (as available under the Phase 1 agreement with Inmarsat) largely unusable in a terrestrial network for many years to come, until filters are fitted as a matter of course to GPS devices (assuming the FCC decides to mandate this). In addition, LightSquared’s Phase 2 L-band spectrum (leased from Inmarsat), which may have less interference problems, will not be available until July 2013. However, TerreStar’s spectrum also has its problems, not least the potential need to negotiate an agreement with DISH as the owner of DBSD for a joint approach to utilize the 2GHz spectrum.
UPDATE: As part of its March 15 GPS Working Group documentation, LightSquared has published full details of its terrestrial spectrum band plans. The Phase 0 spectrum (1 paired 5MHz channel) has its downlink at 1550.2-1555.2MHz. The Phase 1A plan adds another channel with a downlink at 1526.3-1531.2MHz and the Phase 2 plan extends both channels to 2x10MHz, with downlinks at 1526-1536MHz and 1545.2-1555.2MHz. As such, though LightSquared is likely unable to use the Phase 0 spectrum, it might be able to use the second (lower) channel under the Phase 1A plan without causing substantial interference to GPS. The Phase 1A spectrum is expected to be available in February 2012, although under the original Cooperation Agreement a “reasonable delay” of up to 9 months could be added to this date. Whether this timeline for availability is sufficient to support a buildout is unclear.
In the near term, what may overshadow these issues is the status of the $586M loan that LightSquared secured from UBS and JP Morgan in mid February. At the time it was indicated that this loan would bring LightSquared’s available cash up to “about $1 billion”, something that is very important in enabling LightSquared not just to go forward with its planned network buildout, but also to keep paying Inmarsat for rebanding of the L-band spectrum. I had assumed that much of this loan would be spent on the DBSD bid, otherwise it is hard to see why LightSquared would access money at this stage when only a few days before LightSquared had indicated that it was “not going to raise more [money] in the short term”).
The question now is whether this loan has been drawn down and whether LightSquared will be able to continue to spend the money on the L-band rebanding and future network buildout, in view of the challenges the company may face in utilizing its L-band spectrum in the near term. If there are any conditions under which the loan could be recalled, then UBS will have to decide whether its confidence in LightSquared still remains as high as on Monday, or if its exposure is now of more concern. With LightSquared’s current cash burn rate somewhere in excess of $100M per quarter (excluding any terrestrial network buildout costs), this could significantly impact how much time LightSquared has available to secure a partnership.
Next week, LightSquared has indicated it plans to announce “significant news” at CTIA. Will this give some indication of where the company goes from here? Is there a deal with Sprint, T-Mobile or some other partner to announce? Will further disclosure of a partnership with MetroPCS take place, or was that deal limited to a potential 2GHz venture? Many questions remain unanswered, but LightSquared will need to start providing some answers very soon, if it is to move forward with its plans, and meet its promises to the FCC.
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03.12.11
Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:31 am by timfarrar
Could LightSquared meet its buildout obligations to the FCC without doing any buildout?
Amazingly enough, that could be one potential interpretation of the way in which LightSquared’s March 2010 agreement with the FCC is written.
Condition 2. Without regard to satellite service, SkyTerra shall construct a terrestrial network to provide coverage to at least 100 million people in the United States by December 31, 2012; to at least 145 million people in the United States by December 31, 2013; and to at least 260 million people in the United States by December 31, 2015. For purposes of this Condition 2, “terrestrial network??? shall mean the network comprised of: (a) SkyTerra’s L-band spectrum used by its terrestrial network; (b) other terrestrial spectrum that Skyterra is the licensee of or has access to under a spectrum manager lease or de facto transfer lease and deploys to provide the coverage and level of service requirements described in the paragraph 6; and (c) any other terrestrial spectrum that is used by SkyTerra’s terrestrial network or is made available to SkyTerra for pooling with its spectrum and that SkyTerra deploys to provide the Coverage and level of service requirements defined in paragraph 6. “Spectrum that is used by SkyTerra’s terrestrial network??? means spectrum that is licensed to or controlled by a party other than SkyTerra that has been incorporated into the infrastructure of SkyTerra’s terrestrial network.
The only additional requirement is that this buildout “must be capable throughout the coverage area of providing speeds to end users at least at a level commensurate with deployments of terrestrial networks using “fourth-generation??? (“4G???) technologies, such as the 3GPP Long Term Evolution (LTE) or Worldwide Interoperability for Microwave Access (“WiMAX???) standards”. Thus LightSquared is entitled to count towards its obligations any buildout by Airspan in the 1.4GHz spectrum (under their agreement last August) or by Open Range (as announced yesterday) in what is most likely the 1670-75MHz terrestrial spectrum block that LightSquared also controls.
Most significantly, if Harbinger can strike a deal with MetroPCS this weekend, to make a joint bid for the TerreStar and DBSD spectrum, then any LTE buildout in the 2GHz band (presumably under a “spectrum pooling” agreement) could also be counted towards these obligations. Even if a buildout in the 2GHz MSS spectrum did not take place, then MetroPCS has its own LTE buildout in the AWS band and has expressed an interest in entering into a roaming agreement with LightSquared, which could potentially be counted as “other terrestrial spectrum that is used by LightSquared’s terrestrial network” depending on how the agreement was structured.
Once you realize that MetroPCS already has about 97M covered POPs (although not all of them yet have LTE) and that OpenRange was intending to cover 6M POPs (with an option to grow to 12M POPs) under its original agreement with Globalstar, it becomes pretty clear that LightSquared might be able to meet its December 31, 2012 deadline for covering 100M POPs without building out any of its own network coverage. Though that would probably not be the case for the buildout requirements in subsequent years, this highlights that Harbinger might well be able to find a way around LightSquared’s looming deadline next year, even if it isn’t able to fund a large scale deployment in the near future.
As a result, I’ll be very interested to see what happens with MetroPCS, Harbinger and Solus this weekend. DBSD stated on Friday evening that it expects to receive a bid “later today or over the weekend” and will file a report on Monday “to designate the leading bidder”. It seems the exact details of how any agreement with MetroPCS is structured could prove critical to where we go from here.
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03.11.11
Posted in Financials, Globalstar, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:48 am by timfarrar
He came from a hardscrabble background, rising to prominence along with his flamboyant wife, who became a favorite of the tabloids. After raising hundreds of millions of dollars, his unstinting efforts to bring essential resources to millions of people in remote areas attracted the interest and favor of political leaders and government agencies alike.
No, its not the story of Phil Falcone, but the autobiography of Bob Geldof. After today’s announcement of a deal with Open Range, something that other MSS-ATC proponents openly scoffed at when Open Range signed its original deal with Globalstar, I’m also left asking “Is that it?”.
Its worth recalling that the prior spectrum lease contract between Open Range and Globalstar called for annual spectrum lease payments which in the first six years were projected to range from $0.6M to $10.3M, something that is little more than a Band Aid in the context of Harbinger’s $2.9B investment in LightSquared. I’m therefore left with the distinct impression that LightSquared intended to announce a much bigger deal with MetroPCS, as I suggested yesterday, but it has not yet been possible to reach agreement over a joint bid on the 2GHz MSS spectrum.
Given the pressure to reach a deal on any bid for the DBSD spectrum before the next hearing on Tuesday March 15, and DBSD’s intention to announce its preferred bidder the day before, we will have to wait and see if a MetroPCS deal can be struck over the next three days, or if Mr. Falcone will be the one left singing “I Don’t Like Mondays“.
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03.10.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:24 pm by timfarrar
It now appears that Harbinger may very shortly announce a change to the LightSquared business plan to focus first on development of its ATC network in the 2GHz band, through a joint $2.6B bid with MetroPCS and Solus for the DBSD and TerreStar spectrum. This could allow it to mitigate the growing chorus of opposition to its plans for deployment of an L-band network, including planned testimony by Trimble to Congress tomorrow (Friday).
Over the last month, LightSquared has been gradually changing its tune, from initially suggesting that Garmin’s tests were simply flawed, to admitting that there “may be some interference to GPS signals which…may require modification to some existing GPS units” to now conceding that some GPS receivers may need to be replaced.
As I’ve also noted over the last week, a partnership with MetroPCS has become increasingly likely, with a deadline for bids in the DBSD case of Tuesday March 15. On a very similar timeline, on Monday March 14 LightSquared will provide its response to the numerous Petitions for Reconsideration of its L-band ATC waiver that have been filed with the FCC.
UPDATE: I understand that LightSquared has not yet sealed the deal with MetroPCS. Given the upcoming deadlines, it may be a very busy weekend in Reston.
Assuming that Harbinger is able to pull together a bid for the 2GHz spectrum, I would expect LightSquared to propose that if it is given permission to build out its terrestrial network initially in the 2GHz band (with an associated waiver of the ATC gating requirements), it will take more time to resolve the GPS interference issues in the L-band. Because the key issue for GPS interference is that many existing GPS devices will be overloaded by the LightSquared signals within its own licensed spectrum (as opposed to LightSquared’s signal spilling over into the GPS band), a logical compromise would ultimately involve an order from the FCC that GPS devices sold after a certain date (say the end of 2012) will need to include filters that can prevent overload interference, while LightSquared will not operate at the upper end of the L-band spectrum until some time after this (perhaps 2014 or beyond), so that existing GPS devices can be replaced.
If MetroPCS funds the buildout of a 2GHz LTE network in its own coverage areas, then this may be largely sufficient to meet LightSquared’s initial buildout milestone of 100M POPs covered (although perhaps with a modest delay to the current objective of the end of 2012). Though there has been much talk about a deal between LightSquared and Sprint, it seems that the initial 2GHz buildout may not rely on that possibility. LightSquared and Harbinger would then presumably hope that something turns up, whether in the shape of a deal with Sprint, or something else, to fund the rest of the nationwide buildout in 2013 and beyond. Although details may not emerge for some time, it also seems plausible that LightSquared could eventually seek to renegotiate its Cooperation Agreement with Inmarsat, on the basis that Regulatory Changes have made it impossible for LightSquared to secure the originally planned benefits of the deal in the L-band.
Of course, if Harbinger only ends up with a minority stake in a 2GHz spectrum venture, and is unable to exploit the L-band spectrum to any significant degree in the next few years, then this would be a significant come down from its original plans. However, with MetroPCS potentially funding the initial rollout, this would push the problem of where LightSquared is going to get the cash to pay for a multi-billion dollar national network down the road by at least two years, allowing Harbinger to hope that spectrum values and data demand will grow enough for it to recover its $2.9B investment in the L-band and fund the rest of the nationwide buildout at that point.
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