"When Barack Obama’s National Broadband Plan was published in March, wireless broadband spectrum was identified as crucial in helping the US to realise its broadband goals. A chunk of this spectrum had been reserved for mobile satellite services (MSS).
Yet due to the expense of creating a hybrid satellite and terrestrial network, it had remained largely unused.
Even so, because the Federal Communications Commission (FCC) had provided this Spectrum Free of Charge, many observers believed it would be extremely valuable if conditions regarding its use for terrestrial services were eventually relaxed. Chief among them was Philip Falcone and Harbinger, his New York hedge fund.
Harbinger's bullishness was apparent when it bought SkyTerra, a struggling MSS operator, in the same month Mr Obama revealed his broadband plan. SkyTerra had reported a net loss of US$64m on revenues of just US$8m in the final quarter of 2009.
Yet Harbinger had realised the Spectrum SkyTerra owned would have considerable value if the FCC allowed it to be used for a so-called ancillary terrestrial component (ATC).
Eager to put the MSS Spectrum to effective use on the ground, and help move the National Broadband Plan forwards, the FCC altered regulations regarding its usage to suit Harbinger's needs at the same time it approved the hedge fund's takeover of SkyTerra for just US$263m.
Following the acquisition, Harbinger launched a new business called LightSquared – aimed at becoming a national wireless broadband network operating an exclusively wholesale business and expected to cost US$7bn to build.
Soon afterwards, Mr Falcone was suggesting that SkyTerra's spectrum could be worth as much as US$3–5bn. His lofty valuation was based on the expectation that a similar but smaller chunk of spectrum held by Terrestar – another satellite company 30% owned by Harbinger – could be valued at between US$1.5bn and US$2bn, even if Terrestar went bankrupt (always a possibility given the FCC's stringent conditions that spectrum must be used or rescinded).
Last month, it did just that, only weeks after launching its first commercial dual-mode handset (working on both satellite and terrestrial networks) through mobile-phone operator AT&T. With the value of Terrestar's Spectrum set to become the subject of intense scrutiny in the coming months, Mr Falcone's bold assertions could be put to the test.
LightSquared's many challenges
Perhaps the biggest challenge to Mr Falcone's business case comes from Clearwire.
Majority owned by US operator Sprint Nextel, Clearwire already operates its own wireless broadband network and is shopping its wholesale capacity to potential retail partners (it recently scored a deal with Best Buy, the world's largest electronics retailer).
LightSquared is not only playing catch-up from a network perspective but is also targeting many of the same potential customers. T-Mobile is a case in point.
The fourth-largest mobile-phone operator in the US, it is the sort of customer LightSquared craves.
What's more, because Sprint Nextel holds equity in Clearwire, and the FCC has ruled that neither AT&T nor Verizon can lease more than 25% of LightSquared's network, T-Mobile is the only one of the four major mobile-phone operators that could become a key anchor tenant for LightSquared.
Yet T-Mobile has reportedly been in talks with Clearwire about a partnership.
Perhaps more worrying for Mr Falcone is Clearwire's current spectrum sale, expected to be completed by the end of this month.
If it is true that Mr Falcone really wants to profit from the perceived value of LightSquared's spectrum (before ever having to run a real network), then Clearwire could deliver a huge blow to his spectrum arbitrage exit strategy by delivering the wrong kind of valuation benchmark.
While the FCC appears to have been on LightSquared’s side so far, its recent moves may also cause jitters at Harbinger.
In September, a company called Open Range, which relies on ATC spectrum owned by MSS operator Globalstar to operate its rural terrestrial wireless network, was denied a request to delay meeting ATC satellite criteria for a further 16 months.
Open Range has effectively been left in limbo by the decision and must now find other spectrum to offer its services.
Given the FCC's strict rollout targets for LightSquared's terrestrial and satellite services, the ruling against Open Range issues a stern warning to the Harbinger-backed company.
Although LightSquared has been busy in recent months, announcing a US$7bn network agreement with Nokia Siemens Networks, a chipset deal with Qualcomm and around US$2bn in debt and equity commitments, numerous developments could upset the business. Partnership with Clearwire could knock T-Mobile out of LightSquared's equation, while the outcome of Clearwire's Spectrum Sale could also make LightSquared look like a very bad hedge by Mr Falcone.
And deprived of a quick exit strategy, LightSquared could find the cost of actually building a hybrid satellite and terrestrial network to the FCC’s tight rollout targets proves too much. Particularly if all the big retail partners are gone."
Source of Nokia Siemens Networks, LightSquared, Clearwire Corp., Philip Falcone, Craig McCaw, Qualcomm, Open Range Post
http://www.eiu.com/index.asp?layout=ib3Article&pubtypeid=1162462501&article_id=1517583136&rf=0
So Was the Spectrum Free from the FCC or Not?
Clearwire Corp., Craig McCaw did not REALLY Exit? It was more of a Strategic Move to Make him and Eagle River Investors More Money, for it Looks Like Craig McCaw had inside information, in my Opinion... as Isn't T-Mobile hooked up with Philip Falcone and Harbinger Capital and won't T-Mobile be one of the MSS Spectrum Retailers for LightSquared ? Look Deep, Very Deep...
No comments:
Post a Comment