Is Harbinger's $3B bet on LightSquared scaring investors?

The hedge fund Harbinger Capital Partners has roughly $3 billion, or 40 percent of its fund's portfolio, tied up with its wireless venture LightSquared, according to Reuters, and the risk of the venture is beginning to scare investors.

A detailed report on Harbinger by Reuters reveals that LightSquared is Harbinger's largest and most concentrated investment, and the gamble that Philip Falcone, Harbinger's manager, is making on the company's wholesale LTE network could make or break his career. Investors are beginning to worry.

"We are being paid to be more skeptical these days and we are quite frankly concerned by what he seems to be doing," an unnamed representative for an investor in Harbinger told Reuters.

LightSquared has said its wholesale LTE network will allow for terrestrial-only, satellite-only or integrated satellite-terrestrial services (via the terrestrial and MSS spectrum Harbinger scored through a merger in March with satellite operator SkyTerra). LightSquared is planning initial LTE trials in Baltimore, Denver, Las Vegas and Phoenix, with commercial launches planned by the third quarter of 2011. The company, which has access to 59 MHz of spectrum, has said its network will consist of around 40,000 cellular base stations covering 92 percent of the U.S. population by 2015.

The company inked a $7 billion contract with Nokia Siemens Networks in July to design and build the network, and analysts have speculated that NSN might provide LightSquared with vendor financing to defray the cost of building the network. However, analysts noted, LightSquared likely will need more money than that to meet its buildout timetable.

Eliot Hoff, a Harbinger spokesman, dismissed the skepticism, and said that LightSquared's business plan is on target.

"Our strong management team and strategic approach to the business puts us in a good position to take advantage of advances in telecom," Hoff told Reuters.

For more:
- see this Reuters article

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