Hedge Fund Founder Dreams Of Multi-Billion Satellite Network To Address Cellphone Dead Zones

imageHarbinger Capital Partners founder Philip Falcone is attempting to raise $1.6 billion for an international satellite-cellphone business that would provide service in complete dead zones, like deserts and mountainous areas, but not necessarily the third floor of a parking garage.

The WSJ reports that the project is being considered unusually bold given the conservative mood of investors, and the challenges that previous satellite ventures have encountered before. Still, it appears Falcone is undeterred and has approached both Google (NSDQ: GOOG) and News Corp (NYSE: NWS) in recent months for capital, but so far they haven’t made any commitments, according to people familiar with the matter. He is also reportedly prepared to put up as much as $1 billion through Harbinger, or through a new private-equity-style fund he is in the process of raising. One of the major investors in that fund is Korea’s SK Holdings Co., which also may take a role as strategic partner in the venture.

Falcone made his fortune by betting successfully that mining companies would increase in value and mortgage defaults would soar, but last year he started to struggle along with the rest. Falcone believes he has a winning formula that would insert satellite radios into devices at reasonable prices. But observers say that may be difficult and other satellite-phone efforts, most notably, Globalstar and Motorola-backed Iridium, ended up in bankruptcy protection. There’s also Reston, Virginia-based ICO Global Communications, which recently launched its first satellite into space, and is developing a hybrid network that combines both satellite and land-based networks for voice and data services, but has yet to get much past the trial stage.

For the venture to get off the ground, Falcone would have to acquire enough spectrum internationally. Harbinger already owns a sizable portion of SkyTerra, a small U.S. company that controls valuable spectrum, and 28 percent of London-based Inmarsat, which provides maritime, military and aeronautical satellite-communications services. According to the WSJ, Falcone wants to acquire full control of SkyTerra and then combine the two companies. The FCC would have to approve the SkyTerra takeover and merger with Inmarsat, which has a market cap of about $3.2 billion.

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