LightSquared may pursue spectrum swap, claims political foul play

Fighting for its existence, LightSquared is strategizing a possible spectrum swap and targeting critics who it says convinced regulators to pull the plug on its planned LTE network.

Wednesday evening, the Wall Street Journal reported LightSquared might try to exchange its 1.6 GHz spectrum licenses for similar ones controlled by the U.S. Department of Defense, ostensibly because operation of LTE technology over the Defense Department's frequencies--which are used for aircraft testing--would not cause the same type of interference to GPS signals that occurred when used on LightSquared's L-band spectrum. The potential for a spectrum swap was also reported by Bloomberg. The FCC said on Tuesday it would not allow LightSquared to build its network as planned after testing evaluated by the National Telecommunications and Information Administration showed GPS interference was unavoidable.

Failing at a spectrum swap, the only other option for LightSquared might be to sue the government regarding the FCC decision. The company issued a testy statement Wednesday afternoon in which CEO Sanjiv Ahuja asserted politics, not science, led to the FCC's decision. The company has repeatedly alleged it was targeted by deep-pocketed GPS players that had inside connections in Washington, D.C.

Ahuja contended the FCC arbitrarily changed its mind after encouraging LightSquared to build a national broadband system, on which the company has spent $4 billion. "There can be no more devastating blow to private industry and confidence in the consistency of the FCC's decision-making process," Ahuja said, adding, "The government decided to choose winners and losers."

Yet Ahuja said LightSquared remains committed to finding a solution that will enable it to build its network.

The Journal also reported that LightSquared has engaged investment bank Moelis & Co. as a restructuring adviser. LightSquared has considerable debt and is reportedly slated to make a $56 million payment to satellite partner Inmarsat by this Saturday. It is also due to make an April interest payment on $1.6 billion of secured loans.

LightSquared has a 15-year LTE network-sharing agreement with Sprint Nextel (NYSE:S), which gave it until mid March to gain FCC approval for its network. Sprint spokesman Scott Sloat told FierceBroadbandWireless that if the agreement is terminated, Sprint will need to return an advance payment of $65 million that LightSquared made for work that was not yet completed when the companies mutually decided to halt work in December. He said Sprint's Network Vision project, including its LTE roll-out, remains on schedule.

"Sprint has been supportive of LightSquared's business plans and efforts to resolve potential interference issues expediently," Sloat added.

SI Wireless recently launched services as a Sprint roaming partner doing business as MobileNation in rural Illinois, Kentucky and Tennessee and had signed on to use LightSquared's wholesale LTE network.

"We considered LightSquared one of several options, so it's not like we don't have a roadmap. Every roadmap is full of potholes. We always kept our options open. We knew there were issues," said Terry Addington, SI Wireless CEO. "We were keeping our fingers crossed that between the government, the GPS industry and LightSquared, a solution would have been developed."

Addington said LightSquared looked like a great option for smaller carriers looking to partner with a company that would have a national LTE presence. "We're very, very disappointed that a compromise couldn't have been worked out," he said.

Billionaire investor Philip Falcone told Reuters that LightSquared will not file for bankruptcy. His Harbinger Capital Partners hedge fund is the startup's main backer and has scheduled a call with investors on Friday.

LightSquared signed more than 30 companies that wanted to piggyback on its planned wholesale LTE network. One of those companies, FreedomPop, on Wednesday signed a similar agreement with Clearwire (NASDAQ:CLWR), which announced it will have its first wave of 5,000 TD-LTE cell sites operating by June 2013.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg Businessweek article
- see this NYT article
- see this separate Bloomberg Businessweek article
- see this third Bloomberg Businessweek article
- see this CNET article

Related articles:
Clearwire: TD-LTE network to go live in June 2013
FreedomPop inks wholesale broadband deal with Clearwire
LightSquared's proposed network should be shelved, regulators find
LightSquared presses FCC for stricter GPS device standards
Falcone's Harbinger Capital loses 47% of value due to LightSquared writedown