LightSquared gets extension on GPS report, inks deal on Sprint network sharing

LightSquared received a two-week extension from the FCC to issue a final report on tests that looked at whether the company's forthcoming terrestrial network interferes with GPS. In addition, the company received approval from its creditors to have Sprint Nextel (NYSE:S) take control of its spectrum should LightSquared default on its debt, according to a report in the Wall Street Journal.

The report, which cited unnamed sources familiar with the matter, said LightSquared got its lenders, J.P. Morgan Chase and UBS, to give Sprint a second lien on LightSquared's L-band spectrum. According to the report, the second lien is a critical part of the negotiations between Sprint and LightSquared on a network-sharing deal. Under the agreement LightSquared struck with its creditors, Sprint will have to pay the first lien holders $1.5 billion and will take control of LightSquared's spectrum in the event of a default.

Representatives from LightSquared and Sprint declined to comment.

According to the report, under a network-sharing deal, Sprint would be paid in a mixture of cash and use of the spectrum. The report cautioned, however, that a deal might fall apart. LightSquared CEO Sanjiv Ahuja confirmed last week that the company had held talks with Sprint, but said there was nothing to announce.

Meanwhile, concerns continued to swirl around how LightSquared's network interferes with GPS receivers. A final report on the issue was due to the FCC June 15, but LightSquared requested an extension from the FCC until July 1 to give the company time to conduct additional tests for GPS interference. That additional testing includes alternative frequency plans to support the company's LTE network rollout.

"Proper resolution of the GPS receiver overload issue is not possible without a final report that has been adequately considered, documented, and reviewed before it is filed," Jeff Carlisle, LightSquared's executive vice president for regulatory affairs, wrote to the FCC. "Additional time is needed to complete these critical tasks."

Tim Farrar, an analyst with TMF Associates, said the lien agreement is meant to give Sprint security in case LightSquared goes out of business. However, he said that Sprint would still be obligated to pay $1.5 billion on the first lien as well as payments to Inmarsat because of an agreement LightSquared has with the satellite firm.

"If they had a deal with Sprint to announce, this would have just been the background to the deal," he said. "The fact that they came out with this means that there isn't a deal yet. Until the GPS situation is resolved, it doesn't really help."

Farrar speculated that one reason LightSquared asked FCC for an extension on submitting the GPS interference report is to try and put together a winning bid for TerreStar Network's 2 GHz MSS spectrum. Dish Network won the "stalking horse" bid for bankrupt TerreStar Networks' assets with a $1.375 billion offer, according to bankruptcy court filings. According to the court papers, Dish will allow TerreStar to extend the deadline for bids until June 27, with a court-supervised auction set for June 30.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this TMF blog post

Related Articles:
Dish Network lands $1.38B bid for TerreStar, reportedly outflanking MetroPCS
Seybold's Take: Why LightSquared's proposed system will interfere with GPS
LightSquared CEO Ahuja confirms talks with Sprint
Two government agencies say LightSquared's network interferes with GPS
Lawmakers continue to press FCC on LightSquared GPS interference concerns
FCC's Genachowski: We won't let LightSquared operate without GPS interference resolution
Report: Sprint, LightSquared near $2B/year network-sharing deal

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