06.20.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 11:32 am by timfarrar
LightSquared has now announced (as I predicted) that it plans to restrict initial operations to the lower 2x10MHz block of L-band spectrum as “a comprehensive solution to the problem of interference with Global Positioning System (GPS) receivers”. This follows last week’s letter to the FCC, indicating that “among the main reasons” for the delay in submitting the June 15 final report was that “based on preliminary test results, LightSquared determined that additional testing, beyond what had been planned initially, including alternative frequency plans to support its network roll-out, was necessary to permit a proper evaluation of various mitigation options for addressing the GPS receiver overload issue”.
In reality, LightSquared’s press release and FCC letter appear to obfuscate what has happened, because LightSquared’s renegotiation with Inmarsat was actually completed two months ago, and signed on April 25, as was revealed in Inmarsat’s Q1 results. Thus LightSquared devised this new plan at a time when (according to the second Working Group progress report filed April 15), many of the test plans had not even been completed (although it was clear to knowledgeable observers as early as March that operation in the upper band was unlikely to be feasible).
LightSquared’s press release does indicate some further detail about the nature of that renegotiation with Inmarsat (which involved LightSquared making an additional payment of $40M to Inmarsat). Specifically, it seems possible that Inmarsat may not only be removing its 9 months of excusable delay (Inmarsat was scheduled to make the spectrum available in February 2012, but had 9 additional months of potential excusable delay extending to November 2012) in making the 2x5MHz Phase 1A Channel 1 spectrum available (1526-1531MHz downlink), but it appears that LightSquared may have access to the full 2x10MHz Phase 2 Channel 1 spectrum (1526-1536MHz downlink) spectrum sooner as well (it was originally agreed that is would be made available in July 2013). This is reflected in LightSquared’s ambition to be able “to rent space to commercial service providers as soon as the middle of 2012″ under the revised plan (although that of course is yet another delay from the “early 2012″ we heard only a month ago).
Of course the key issue is that as I’ve previously highlighted, with only 20MHz of usable spectrum for its terrestrial network, it is very hard for Harbinger to justify its LightSquared equity investments (or raise additional money), when there is a $2B+ lease obligation to Inmarsat ($115M per year increasing at 3%) and $1.5B of first lien debt ahead of them. This is especially clear now that both DBSD and TerreStar are being sold in bankruptcy court (each with 20MHz of spectrum) for less than $1.5B apiece.
As a result, it is far from clear whether whatever conditions Sprint has imposed to move forward with the network sharing agreement can and will be met. Unsurprisingly LightSquared therefore insists that over “the next several years” it will “work closely with the FCC and the NTIA, as well as the relevant US government agencies and commercial GPS users, to explore mitigation possibilities and operational alternatives that will allow LightSquared to continue to expand its business” (i.e. persuade the FCC to mandate the rapid introduction of receiver standards so that it can use the upper L-band spectrum).
This proposal (which entails the FCC giving LightSquared the green light to proceed immediately in the lower band) is very unlikely to satisfy either the GPS industry or government departments such as the DoD and FAA, which have stated that they will request further testing before LightSquared is given the go-ahead. On the other hand, the FCC Chairman has already indicated that he is favorably disposed towards LightSquared. Thus the near term outcome may be determined by whether LightSquared’s Congressional opponents can force the FCC to back down.
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06.19.11
Posted in Financials, Handheld, LightSquared, Operators, Regulatory, Services, Spectrum at 7:14 pm by timfarrar
What would you know? I go camping for a weekend, and suddenly we have a $20 billion network sharing “deal” between Sprint and LightSquared “to share network expansion costs and equipment, and to provide high-speed wireless service to the phone company” described in a leaked letter to “Harbinger Capital Partners hedge fund investors”. This seems like a very peculiar way to reveal such a ground-breaking deal, especially as Sprint notably declined to comment on whether or not a deal had been signed, and there is little clarity about whether this is a new deal or simply the same “accord” that was reached some time ago.
UPDATE (6/20): LightSquared’s CEO today “declined comment on whether a deal had been finalized”, after telling Bloomberg in an interview on June 10 that “if we have something to announce we will be back here”.
Regardless, the obvious question is what conditions remain to be satisfied, before Sprint actually moves forward with the buildout. As I’ve noted before, it is critical that Sprint gains sufficient security to cover its upfront costs, either from rights to LightSquared’s spectrum assets or LightSquared raising additional cash through an IPO. However, a near term IPO looks like a stretch, and it is unclear whether the second lien spectrum rights granted this week are sufficient to satisfy Sprint. Also LightSquared obviously needs to resolve the GPS interference issues, so it can actually use its spectrum. If the leaking of this deal (presumably by Harbinger) serves to plunge Sprint into the firestorm of the GPS interference debate, then it will be very interesting to see whether Sprint decides to actively support LightSquared or takes a more neutral position with the FCC and Congress.
However, all that is somewhat of an aside to the real purpose of this post. My camping trip was only 40 minutes away from my home in Silicon Valley, but in an area with absolutely no cellphone coverage. Wouldn’t it have been great to have one of LightSquared’s new dual mode satellite phones (if and when they come to market) so I could have had a connection to the real world that would have allowed me to hear about the breaking news? Unfortunately not, because when I looked up at the sky, all I could see was trees, and as with any MSS network, you need a line of sight to the satellite to be able to make or receive a call.
TerreStar’s Genus satellite phone has proven to be a complete disaster, despite the expectation that there would be vast global demand for these phones. As a result, I wonder if some of the commentators in the LightSquared proceeding really have any idea what they would be getting from the LightSquared network in rural areas (after all, a terrestrial network covering 92% of the population will leave at least 25M people relying on satellite coverage).
For example, this letter asks us to “think of Native American communities who do not even have basic cellphone service now but would with this network” and this letter notes how the “new super-fast broadband wireless network that is backed up by satellite communications…would provide our staff seamless connectivity even in extremely remote locations”. However, that’s hardly surprising when we are told how you’ll have voice connectivity and can get your e-mails “no matter where you are, if you step out of your car, in the Yellowstone National Park” (where there’s also an awful lot of trees and mountains) or “in the middle of Grand Canyon” (pretty difficult when there’s a 5000ft cliff to your south). Haven’t we heard that one somewhere before?
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06.17.11
Posted in Financials, LightSquared, Operators, Spectrum at 8:20 am by timfarrar
I remarked last month that it was strange for Sprint to note (at the New America Foundation/LightSquared event on May 12) that it would be able to host other spectrum on its Network Vision platform, including “possibly Clearwire, possibly public safety???, while conspicuously failing to include LightSquared on that list. Perhaps that is because (as a contact insisted to me yesterday), Sprint wanted first lien rights to LightSquared’s spectrum, not the second lien rights that it was ultimately granted.
However, it also seems the probability is rising that a national public safety network will soon be built out in the D-block, after yesterday’s White House event to push a combined incentive auction/public safety bill. As a result, I have to wonder if some of Sprint’s apparent indecision about network sharing with either Clearwire or LightSquared is prompted by the possibility that a network sharing customer who is unlikely to go bankrupt might emerge, in the shape of this national public safety network.
Indeed the purported $2B per year LightSquared agreement could easily provide a template for such a rollout (albeit probably without Sprint being able to use capacity on the public safety network). In particular, the spreading of costs that is part of that agreement might help to reduce concerns in the public safety community about the buildout potentially being delayed, if incentive auction-based funding is not available for several years.
Thus, if signs do now emerge that the government may offer to assist in defraying some of Sprint’s Network Vision buildout costs, both Clearwire and LightSquared might be left to ponder the truth of the statement that the nine most terrifying words in the English language are “I’m from the government and I’m here to help”.
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06.15.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 7:40 pm by timfarrar
With two subcommittees of the House Transportation and Infrastructure Committee planning to hold a joint hearing to examine potential GPS interference from LightSquared next week, not to mention Harbinger’s own efforts to secure partnerships so it can move forward, it is certainly potentially helpful to bury the results of the GPS Working Group report for another couple of weeks.
However, this action has left the GPS industry furious after their enormous efforts to accommodate LightSquared’s aggressive timetable (set at LightSquared’s insistence so it could “continue to roll out our network and meet the rigorous construction timetable that the Commission has made a condition of our authorization,” a promise that it has not exactly been keeping).
As a result it would not be in the least surprising if some data now emerges, and indeed Communications Daily is already reporting on a leaked copy of the General Location/Navigation subgroup report, which “concluded that all phases of the LightSquared deployment plan will result in widespread harmful interference to GPS signals and service and that mitigation is not possible,” despite the fact that “no stone was left unturned as the team evaluated proposals for mitigation options involving both LightSquared’s transmitters and GPS receivers.”
The National Public Safety Telecommunications Council (NPSTC) has also filed details with the FCC on their portion of the test results (which notes that some public safety applications would see “vast service outages???) and I wonder how many other subgroups will now also decide to make available their own contributions to the Working Group report, either through the FCC docket or through leaks to journalists or Congress?
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Posted in Financials, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:28 am by timfarrar
Its now being reported that LightSquared plans to ask the FCC for an extension of today’s deadline for submitting its report on GPS interference until July 1, as the company is apparently claiming that “all the information required for the report had not yet been submitted”.
However, the supposed new target date of July 1 conveniently just happens to be the day after the rescheduled June 30 auction for TerreStar Networks. It seems a huge stretch to imagine that this is purely a coincidence, when DISH blocked Harbinger’s attempts to secure access to the TerreStar spectrum last night, which I understand was the cornerstone of Harbinger’s planned “2GHz first” strategy, that first emerged back in March. Its also pretty hard to explain why it would take another two weeks simply to compile the report, given that the tests were apparently completed a couple of weeks ago.
UPDATE: One reason unrelated to TerreStar is that it could be fairly convenient for LightSquared to bury the report on the Friday of a holiday weekend.
Now the question is whether the GPS industry (who want LightSquared to move to different spectrum although perhaps did not expect that to actually happen) and the FCC will play ball and allow the deadline to be postponed. If that happens then Harbinger will have two weeks to either put together a superior bid (presumably with MetroPCS) for TerreStar, or to strike a network sharing deal with Sprint (if today’s first lien debt amendment proves sufficient to persuade Sprint that they have adequate security). Depending on which path proves successful (if indeed either one does), LightSquared will then know if it can propose using 2GHz spectrum initially, or if it will need to try and defend its L-band spectrum rights to the death.
UPDATE: LightSquared has filed the request for an extension until July 1, which has been granted almost immediately by the FCC. I am told that other members of the Working Group (with the exception of Sprint) opposed LightSquared’s request for an extension, and a filing to this effect has now appeared in the IB docket. Today the National Public Safety Telecommunications Council (NPSTC) also filed comments detailing their portion of the test results, noting that some public safety applications would see “vast service outages” and suggesting use of the 2GHz MSS spectrum for downlinks paired with L-band uplinks as one (albeit somewhat impractical) alternative to prevent interference.
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Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 10:24 am by timfarrar
Hot on the heels of Harbinger’s apparent failure to secure rights to use TerreStar’s 2GHz spectrum, which could have provided an alternative route forward while its L-band GPS interference issues are resolved, comes news that LightSquared’s first lien lenders have agreed to a modification which would give Sprint the right to pay them off and take control of LightSquared’s L-band spectrum in the event of a default. This agreement is slightly different to what I had understood that Sprint was looking for back in April, and gives Sprint far less security than pre-emption of the first lien rights would have offered.
In particular, in the event of default, Sprint would apparently have to pay off the $1.5B of first lien debt and would also presumably need to keep the Spectrum Cooperation Agreement with Inmarsat in place, which involves payments of $115M per year (increasing at an annual rate of 3%) plus additional rebanding payments over the next year. Thus the effective cost to Sprint of acquiring LightSquared’s spectrum assets would be in the region of $3.5B-$4B (the NPV of the Inmarsat payments is $2B+).
That might not be too unreasonable if LightSquared had access to 40MHz of LTE-capable spectrum in the L-band (though it is somewhat higher than the current combined price of $2.86B being offered by DISH for DBSD and TerreStar), but if the FCC declines to grant LightSquared the ability to use the upper part of the L-band spectrum, in the face of the major GPS interference problems apparently found in that part of the band, it looks utterly unrealistic for what would then only be about 20MHz of LTE-capable spectrum at best.
Its also worth noting that if LightSquared decided to terminate the lease agreement with Inmarsat, after the first five years of lease payments are made, then under current arrangements it would only have access to the Phase 1 spectrum (i.e. 2x5MHz in the lower L-band and 2x5MHz in the upper L-band). If LightSquared terminated the agreement with Inmarsat without making five years of lease payments, then the default spectrum allocation would go back to even less usable spectrum, probably resembling something like the Phase 0 allocation (i.e. only 2x5MHz in the upper L-band). As a result, there is certainly no benefit to LightSquared (or Sprint) in trying to get out of the Inmarsat agreement and expecting that there will still be 20MHz of LTE-capable spectrum that doesn’t interfere with GPS.
Thus, while the amendment to LightSquared’s first lien debt agreement points the way to a potential deal with Sprint, the GPS issues might still prevent the network sharing agreement being consummated. Of course, even if the Sprint deal does go through, this agreement also increases the likelihood that Harbinger’s equity investments in LightSquared will ultimately be worthless, because if LightSquared is unable to raise additional equity funding to pay its obligations to Sprint under the network sharing agreement, Sprint would then have a (presumably substantial) claim on the LightSquared assets before LightSquared’s equity holders saw any proceeds.
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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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Posted in Financials, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 9:35 am by timfarrar
In a recent Vanity Fair profile, Phil Falcone was summed up by a rival fund manager as “A roll-the-dice, put-everything-on-red kind of guy”. However, with the report on GPS interference coming up tomorrow, it also appears that the GPS industry is united in putting all their efforts into pushing the emergency stop button on LightSquared. Particularly significant is the decision of the PNT Advisory Board last week to file comments with the FCC:
The formal recommendation reads: “The PNT Advisory Board recommends the PNT Executive Committee (EXCOM) should file formal comments with the Federal Communications Commission (FCC) regarding the interference issues.
“1. Based upon information and test results provided to the PNT Advisory Board at the meeting of June 8-10, 2011, the provision of GPS services cannot be assured if the LightSquared proposal for satellite and terrestrial broadband provision using the MSS L-Band receives final approval.
“2. The only reasonable and viable option to continue ubiquitous availability of GPS and the provision of a new 4G wireless broadband capability would be for the FCC to assign an alternate frequency spectrum to LightSquared that has little or no probability of affecting the delivery or utilization of GPS/GNSS services.”
The recently passed House version of the National Defense Authorization Act (NDAA) would block the FCC from authorizing LightSquared operations until GPS interference concerns have been resolved. Thus, if the GPS community continues to receive strong Congressional backing, it may become impossible for the FCC to authorize commercial operation of LightSquared’s planned terrestrial network, whatever LightSquared decides to recommend in its June 15 report (note that this report will undoubtedly not have any meaningful consensus recommendations about how to proceed). Of course it is implausible that the FCC would simply assign “alternate frequency spectrum” to LightSquared, and the other spectrum controlled by LightSquared (8MHz in the 1.4GHz band, leased from TerreStar Corporation, and 5MHz in the 1670-75MHz band) is unlikely to be usable for a large scale mobile LTE buildout.
As a result, LightSquared and the FCC both face a dilemma about how to move forward. Perhaps Harbinger could partner with the first lien debt holders (other than Echostar) (or even partner once again with MetroPCS and Solus) to make a run at TerreStar Networks, similar to its efforts in the DBSD bankruptcy auction back in March. Although providing LightSquared with a waiver of the ATC rules in the 2GHz band might be one option for the FCC, that would not solve LightSquared’s funding problem, and more likely would exacerbate it, because LightSquared would potentially then have to lease TerreStar’s 2GHz MSS spectrum from the consortium buying the assets out of bankruptcy. Granting TerreStar a waiver of the ATC gating criteria would also potentially disrupt the FCC’s current consultation process, which seeks to persuade DBSD and TerreStar to give up their spectrum for incentive auctions. Even more problematically, a decision to use TerreStar’s spectrum initially might give the Congress the excuse they are looking for to completely prohibit LightSquared from using the L-band for future terrestrial operations, as the GPS industry is requesting.
As I noted a few days ago, Harbinger therefore needs to announce something big to turn around perceptions of LightSquared. At this point, some sort of deal with Sprint (with Sprint expressing confidence that the interference issues are manageable) appears to be the best option with a chance of achieving that, with a potential partnership with MetroPCS and Solus to bid for TerreStar a rather less attractive backup choice.
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06.10.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 4:37 pm by timfarrar
As data continues to emerge on the results of the GPS interference testing, it now seems that LightSquared intends to propose that it should initially use the lower part of its L-band spectrum, but that GPS users should be required to fit filters so that after a multi-year sunset period, LightSquared would be able to use the full 40MHz of MSS-ATC spectrum in its terrestrial network. Indeed LightSquared appears to be insistent that “eventually the company intends to use all the spectrum allocated to it by [the] FCC”.
On the other hand, the GPS industry is asserting that “there is no viable technical fix” and the FCC “should focus its efforts on finding [alternative] spectrum that LightSquared can operate in”. The government-chartered NPEF task force has presented a range of potential mitigation options, of which it appears the most plausible is to “limit implementation to lower end of MSS L-band” (i.e. to just 20MHz of the 40MHz of MSS-ATC spectrum that LightSquared has access to under its agreement with Inmarsat).
It therefore seems possible that caught between these conflicting demands, the FCC could choose to split the baby, permitting LightSquared to operate in the lower part of the L-band, while putting off a decision about the upper part of the L-band until considerable further study is undertaken (very likely taking a year or more). However, this would make it much harder for Harbinger to fund the LightSquared buildout, because it already has a $2B+ obligation to Inmarsat for its spectrum lease (the NPV of $115M increasing at 3% p.a.) and clearance costs, plus $1.5B in first lien debt. Unless the lower 20MHz of spectrum was valued at an implausible $1 per MHzPOP, or LightSquared could renegotiate its deal with Inmarsat (which seems unlikely given that LightSquared has just had to pay Inmarsat another $40M to eliminate Inmarsat’s permitted 9 month excusable delay in making the Phase 1 spectrum available), it would be hard to invest at anything close to the $2.5B value that Harbinger puts on LightSquared’s equity. It would also be problematic for the GPS industry, because GPS-augmentation solutions such as John Deere’s Starfire (for precision agriculture) would still be severely affected by LightSquared’s lower band operations. Thus splitting the baby might actually be far from optimal, forcing large costs on at least some parts of the GPS industry, while not enabling the buildout of LightSquared’s network to proceed.
Next week all eyes will be on the June 15 report, in which LightSquared will set out its proposed mitigation strategy. I would expect it to include a proposal for initial operation in the lower part of the L-band without any further restrictions or delay (something which will presumably be resisted by the GPS industry, who will instead likely propose further study, given that LightSquared “failed to deliver test equipment that matches its proposed operations” for the Las Vegas tests), and then propose an aggressive timetable for resolution of issues in the upper band (where the GPS industry will ask that all terrestrial operations be completely ruled out).
UPDATE: OnStar has also now requested that the FCC require additional testing before reaching a final decision to allow LightSquared to commence ATC service.
However, the big question is whether LightSquared will accompany the release of the report with an announcement of a network sharing agreement with Sprint (arguing that it could use capacity from Sprint if necessary while it waits for upper L-band spectrum). This might sound like a plausible proposition, but of course LightSquared would not be able to pay for its buildout without substantial incremental funding. Realistically the best that LightSquared could hope for is an MoU which requires it to obtain more funding and resolve its FCC issues within the next few months (before Sprint starts its Network Vision buildout in Q4).
It is unclear whether Sprint is prepared to get caught in the Congressional crossfire between the GPS industry and LightSquared, at a time when it needs all the support it can get in its attempts to block the AT&T/T-Mobile merger, and that will probably determine whether a deal comes to fruition next week or not. However, given the pressure Harbinger and LightSquared are under at the moment, it is almost certainly essential that they announce a deal with Sprint next week to have any chance of changing perceptions that Harbinger is as doomed as Captain Ahab.
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06.08.11
Posted in Financials, LightSquared, Operators, Spectrum at 7:01 pm by timfarrar
As concerns continue to swirl around Harbinger and LightSquared, one unexamined issue is whether any FCC (or Congressional) action to restrict LightSquared’s access to the upper part of its spectrum or revoke the January waiver could put LightSquared in default on its $1.5B of first lien debt.
Because this debt offering was private, it is not possible to examine the indentures which specify the events of default. However, TerreStar’s first lien debt indentures are public and probably provide some guidance as to the likely language in the LightSquared debt indentures. TerreStar’s debt indenture states that the events of default include:
(10) (a) failure by the Issuer and the Guarantors to receive the U.S. FCC Letter of Intent Authorization by July 31, 2008; or (b) a revocation, cancellation or relinquishment of (i) the U.S. FCC Letter of Intent Authorization or (ii) any FCC authorization held by the Issuer or a Restricted Subsidiary of the Issuer to operate ancillary terrestrial component facilities, unless the revocation, cancellation or relinquishment (x) remains subject to reconsideration, review, or appeal at the FCC or any court, provided that during the pendency of such reconsideration, review or appeal the Issuer is permitted to utilize the related spectrum and continues to conduct its business in the ordinary course, or (y) is accompanied by the issuance of a substitute or successor license, permit, or authorization of substantially equivalent utility;
While some features are not directly analogous (because, as a Canadian-registered satellite system, TerreStar held a Letter of Intent Authorization from the FCC rather than a License), the critical language would appear to be “a revocation, cancellation or relinquishment of … any FCC authorization held by the Issuer … to operate ancillary terrestrial component facilities, unless the revocation, cancellation or relinquishment (x) remains subject to reconsideration, review, or appeal at the FCC or any court, provided that during the pendency of such reconsideration, review or appeal the Issuer is permitted to utilize the related spectrum and continues to conduct its business in the ordinary course“. If LightSquared’s current ATC waiver was revoked or even if the waiver remained in place but LightSquared was rendered unable to use all of the “related” spectrum for its ATC operations, then (assuming similar language is in the LightSquared first lien debt indentures) an argument could plausibly be made that an event of default had occurred.
Of course, just because an event of default had occurred (and any such proposition would be vehemently resisted by Harbinger), that does not necessarily mean that the first lien debtholders would take action to enforce their rights. However, if a truly dire outcome (such as Congress forbidding the FCC from authorizing LightSquared’s terrestrial operations) did come to pass, then the debtholders might be better off trying to get hold of the cash on LightSquared’s balance sheet before it was all spent, and trying to renegotiate the spectrum lease agreement with Inmarsat before all of the Phase 1 payments had been made. Certainly I would expect all of these options to be under active consideration, as the first lien debtholders in LightSquared contemplate the various possibilities for what happens next.
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