Speaking at a Deutsche Bank Securities Leveraged Finance conference, LightSquared Chief Financial Office Michael Montemarano told the audience that the wireless operator has enough cash to operate until Q1 2012, but after that … nothing. He says that he can’t raise additional funds because of the situation with the FCC. Some backstory: LightSquared is a wireless operator run by a hedgefund. Their goal is to disrupt the American wireless industry by providing a viable competitor to the market. Unlike today’s operators, they’re not going to sell service directly to consumers, instead they’ll sell access to other businesses who then sell it back to you. This is called the wholesale model. Monemarano claims that American operators typically charge about $56 to deliver 1 GB of data, and that he can deliver that same gigabyte for “single digit” dollar figures. There’s a slight snag though. The spectrum that LightSquared wants to use to deploy their network is dangerously close to the same bands that are used to enable GPS.
Over the past few months the FCC has been bickering with LightSquared as to how they can deploy their network without causing interference. No one wants to be on a flight where the pilot has no idea where they’re going. First LightSquared said that they’ll use the lower portion of their spectrum and crank down the power output of their towers. That fixed a lot of problems, but not all of them. When it comes to high precision GPS equipment, the kind of stuff used by the military, agricultural industry, that sort of stuff, LightSquared said that they’ve invented a cheap solution to fix interference. How much will it cost to modify all that high precision gear? As much as $400 million.
You can see why we’re incredibly bearish about LightSquared, but hey, if they do manage to pull off their goals then more power to em’! We’re more interested to see what Dish Network has up their sleeve. They’ve asked the FCC for permission to use the 40 MHz of spectrum they own to build an LTE-Advanced network.
[Image Credit: Flickr, note that the photo is of Sanjiv Ahuja, CEO of LightSquared]