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Summary:

LightSquared’s backer, Philip Falcone, explained on Thursday his rationale for a voluntary bankruptcy filing for the planned wholesale LTE network, but given the paucity of actual assets in LightSquared, and the fact that Falcone has invested billions so far into LightSquared, this is almost a no-brainer.

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LightSquared’s backer, Philip Falcone, explained on Thursday his rationale for a voluntary bankruptcy filing for the would-be wholesale LTE network provider as opposed to selling the company and its assets. Given the paucity of actual assets in LightSquared, and the fact that Falcone has invested billions so far into LightSquared, this is almost a no-brainer.

From his press release:

“While no decision has yet been made, the rationale behind a voluntary filing would be to give us the necessary time to continue with our vision, build the network and protect the company from creditors who are more interested in a quick flip.”

Let’s think about what LightSquared actually has to offer. Despite signing multiple customers and trumpeting those deals, LightSquared actually doesn’t yet have a network. It’s primary assets appear to be two satellites and some controversial spectrum. Let’s start with the satellites.

One has already launched and is delivering service from space. So far TMF Associates analyst Tim Farrar says that bird provides revenue but not profits, and is an unlikely candidate for a high bid because it’s already in orbit. As an example he points to Irridium’s bankruptcy. The satellite company spent billions on launching a constellation of satellites, only to then fail and sell its birds in orbit for $25 million.

However, LightSquared second orbiter is still on the ground and is much more valuable. It’s worth up to $120 million, Farrar estimates, and he says Boeing is the most likely buyer since the aerospace company can launch it for the Mexican government’s planned satellite network.

And then there’s the spectrum. Falcone’s whole plan was based on a financial play to flip the satellite spectrum that underpinned the eventual LightSquared network. The FCC approvals and waivers helped boost the value of that spectrum, especially as fears of a spectrum shortage gained publicity. But instead of selling LightSquared’s satellite licenses for a quick windfall, Falcone found himself building an actual network. As that network came closer to becoming real, the GPS industry freaked out about the possibility of interference.

That debate led to tests, political wrangling and finally the FCC pulling the waiver that would allow LightSquared to operate a terrestrial network using airwaves designed for satellites. That’s bad news for LightSquared’s business, but it also is bad news for those airwaves. The value of spectrum cleared for terrestrial mobile broadband is high, but now that those L-band airwaves are politically poisonous, it’s doubtful they’re worth much. Falcone claims bankruptcy helps LightSquared avoid a quick flip, but it’s worth wondering exactly what Falcone actually has to flip.

  1. First, the satallite has great value because it has the largest reflector ever fielded. Sat phones failed in the past because you have to carry around a large parabolic reflector antenna for your phone to reach the satellite, plus an electronics technician to set it up and orient it for your phone. The “Big Phil” (Sky Terra 1) has a super high gain antenna, so the phone can be about the size of a normal cell phone, and does not need giant parabolic antenna nor electronics technician to set up what you don’t need.

    Second, we make a filter that will keep high powered signals out of GPS. Yes, anyone can get as many as they want now. Yes it is expensive at $1200.00 each, yes it is the size of a brick. We made new physics, but there is a limit to what anyone can do about 15,000 watts 1000 feet away on an adjacent frequency. Hopefully, the FCC will hire some engineers in the future.

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  2. Keith Peshak Sunday, April 29, 2012

    First, the “Big Phil” (Sky Terra 1) was designed to be used as a Sat Phone. These have always failed in the past, with rates of a billion dollars per month, and ten customers. How about trying $20/month and a billion customers? Find a decent price point!

    Second, the “Big Phil” could be used as a PNT system disbursal point. We only have GPS since Homeland Security shut down Loran-C, leaving us with only one PNT system, upon which all of modern society cannot exist without, which is easily jammed with a pleasure boat TV receiving antenna (like happened in Monterey Bay). Yes, the Homeland Security Secretary should be prosecuted for stupidity rising to the level of treason, but, where you going to find smarter? Fix the problem she created!

    Third, the “Big Phil” can be used to broadcast radar maps, TFRs, aircraft positions for collision avoidance purposes, satilite weather photos, … If the FAA was actually run by pilots, they would buy it and operate it.

    Sky Terra 1 has great value, and Sky Terra 2 should be launched. Holding this highly useful existing system hostage for just another cell phone company is technically rediculous use of infrastructure. It can obsolete cell phone companies!

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