Dish withdraws $2.2B bid for LightSquared's spectrum

Dish Network (NASDAQ: DISH) is pulling its $2.2 billion bid to acquire LightSquared's spectrum assets while LightSquared is in bankruptcy protection. That move presumably will the way for a group backed by Harbinger Capital Partners, LightSquared's chief backer, to take control of the company.

Joshua Sussberg, a lawyer for an official committee appointed to oversee any potential LightSquared auction, opened a court hearing today by confirming that Dish had pulled its bid, according to Reuters. Dish sent in the so-called termination letter just before a trial began in Manhattan bankruptcy court against Dish and Chairman Charlie Ergen over how he acquired LightSquared debt, according to Bloomberg.

Dish's bid was filed by a group of LightSquared lenders that are owed nearly $2 billion. LightSquared sued Ergen over his acquisition of LightSquared debt. LightSquared argued that Ergen bought the beleaguered company's debt on behalf of Dish and not himself, and was using the debt as a way to control LightSquared's reorganization. Such purchases are illegal under LightSquared's credit agreement, which prohibits competitors from buying the debt, the company has said.

Dish declined to comment, as did a representative for Harbinger, the hedge fund controlled by Philip Falcone, who has been battling Ergen for control of LightSquared.

LightSquared recently put forward a plan by Fortress Investment Group, JPMorgan Chase & Co. and Melody Capital Advisors to get LightSquared out of bankruptcy. That standalone plan, put forward late last month, includes a $2.5 billion exit loan and at least $1.25 billion in new equity. Falcone and Harbinger, which controls LightSquared's equity, are backing the new plan. The new LightSquared plan is conditioned on approval from the FCC for LightSquared to modify its spectrum holdings.

"The battle is really Charlie and Phil wrestling for control," Erik Gordon, a professor at the University of Michigan's business and law schools, told Bloomberg. "In addition to dollars and cents, you've got two guys, each guy's ego is big enough to fill up a room."

At the heart of the matter is LightSquared's L-Band spectrum, which Dish is seeking to acquire to enhance its spectrum holdings. LightSquared entered bankruptcy protection in May 2012 after the FCC revoked its conditional license to operate because of unresolved concerns that its planned LTE-based network would interfere with GPS receivers.

Dish controls 40 MHZ of AWS-4 spectrum in the 2 GHz band, and is also the leading bidder for the 1900 MHz PCS H Block spectrum auction, scheduled to start Jan. 22. Many analysts had thought Dish would snap up LightSquared's spectrum to increase the value of its spectrum holdings. Reuters reported that Dish is considering a potential bid for T-Mobile US (NYSE:TMUS). Ergen has repeatedly said Dish is looking for a wireless partner.

For more:
- see this Reuters article
- see this Bloomberg article
- see this WSJ article (sub. req.)

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