LightSquared is at the end of its rope and needs a solution to get its mobile broadband network off the ground. The FCC recently rejected the company’s plan to run a mobile broadband on spectrum that lies close to consumer GPS. A report from the NTIA claimed LightSquared’s network would interfere with current GPS technology and there was no way LightSquared could mitigate this interference. With no viable way to get its network operational on its current spectrum, the company is desperate to make a deal that’ll save investors the billions of dollars they’ve sunk into the company.
One idea the company is proposing involves a spectrum swap with the US Department of Defense. LightSquared would hand over its spectrum, which is ideal for GPS communication, to the DOD and in exchange receive a band of spectrum that is further away from consumer GPS. This distance between the two spectrum holdings would prevent the interference issues that now plague the company’s proposed network. Spectrum swaps like this take time and time is limited for LightSquared. The company faces a mid-March deadline from Sprint which has threatened to pull its support if LightSquared can’t get approval from the FCC.
If this spectrum swap doesn’t work out, then LightSquared may be forced to either sell its spectrum holdings or declare bankruptcy. Philip Falcone, whose Harbinger Capital Partners hedge fund invested billions in LightSquared, has said bankruptcy is not on the table. LightSquared, however, has a $56 million payment due this weekend to satellite service provider Inmarsat and investors are worried. Tim Farrar of TMF Associates says investors “would prefer LightSquared to file for bankruptcy before that payment is made.”
With its future uncertain, LightSquared reportedly hired investment bank Moelis & Co as a restructuring advisor. This doesn’t necessarily mean bankruptcy is imminent, but the outlook doesn’t look good for LightSquared.
[Via WSJ and NYT]