For a mobile operator without even a network or operational handset, LightSquared has struck a lot of deals and been associated with partners ranging from Time Warner Cable (s twc) and Cablevision (s cvs) to Metro PCS. AT&T (s t) even mentioned it as a viable mobile broadband competitor in its conference call to discuss its plans to buy T-Mobile. Even the Kansas City ISP I spoke with earlier this week on Google Fiber is interested in LightSquare’s satellite network. So how did an underfunded company with contested spectrum, an FCC waiver and no terrestrial network manage to become such a force in the telecommunications industry?
LightSquared’s promise is huge. The idea of a competitive wholesale Long Term Evolution network was enough to get me away from my family on a Saturday night one year ago to write about its plans to cover the nation with fourth-generation wireless service. Sure, I had my doubts — mostly because building a combined satellite and terrestrial network is a daunting task that requires lots of money, help from regulators, a terrestrial partner and cool devices that could work on both networks — but I was eager to see something like this succeed.
At the time, I heard from sources inside Harbinger, the private equity firm backing LightSquared (using a different name in March 2010) about prospective deals and other tidbits. The point was to address some of my doubts about the network’s viability, but it also implied the value in LightSquared was mostly about the spectrum it held. Yet, many of these “imminent deals” never materialized, and my doubts about the quality of satellite phones still remains. LightSquared has shown people a prototype USB dongle from AnyData, according to industry analyst Tim Farrar, but no one knows if it will work on all LTE networks or with 3G networks.
The latest indication of LightSquared’s tenuous grasp of reality is its insistence that concerns of GPS interference, which have dogged the company since late last year, won’t halt its expansion plans. Perhaps those worries won’t, but what about LightSquared shutting down its efforts to build out tower networks in several U.S. cities? And Nokia Siemens Networks (s nok) (s si), which is supposedly building out the terrestrial infrastructure, has backed off a deal with LightSquared. My requests to talk to LightSquared have not been answered.
In terms of network availability, LightSquared is set to launch its first LTE markets in the third quarter of 2011, according to the documents it filed with the FCC a year ago, with up to nine markets expected to be active by the end of the year. On Friday, Light Reading quotes an executive at LightSquared saying those plans are still on track:
“Our launch is still on track. We’re looking for a launch by the end of the year certainly,” Jeff Carlisle, executive vice president for regulatory affairs and public policy at LightSquared, told Light Reading Mobile during a call Thursday.
I like the implied hedge in the statement. It doesn’t state the launch is still planned for the third quarter, instead saying it will certainly happen by the end of the year, which actually makes it late for the original plans. But who’s counting dates?
LightSquared says it’s in negotiations with 15 potential customers and has recently announced deals with Best Buy (s BBY), smart grid provider Airspan Networks and Leap Wireless (s leap), which operates the Cricket pre-paid phone brand. That’s pretty good for a company with no network to speak of and no devices on the market. Yes, it has a deal to make sure Qualcomm (s qcom) builds dual-mode satellite and terrestrial chips and also recently got a waiver from the FCC which means it no longer has to make sure its customers use both the satellite and terrestrial network.
However, it still looks like LightSquared is building a castle made of sand:
- It’s fighting with the Pentagon and the multi-billion-dollar GPS industry over interference, and while it had made an offer to buy new spectrum to mitigate the risks of GPS interference, that action just shined more doubt on Harbinger’s bet on LightSquared.
- It doesn’t have devices, unless we count the poorly reviewed Genus phone offered by AT&T and TerreStar.
- It does have to have dual-mode chips available for its customers, but if it changes spectrum to avoid GPS interference, that will require a radio chip tweak that could cause delays in devices getting to market.
- It has until the third quarter (or end of year) in which to cover 9 million people and until 2012 to cover 100 million.
- It no longer appears to be working with Nokia Siemens Networks, although it is still active in building out networks in Denver, Baltimore/Washington D.C. and Las Vegas.
- Its best hope for a network build-out partner, T-Mobile, is set to be acquired by AT&T.
That castle seems to be built on the idea that LightSquared’s spectrum is worth more than the billions Harbinger has already put into it, or the $585 million it has raised in the debt markets. However, if AT&T takes T-Mobile off the market, then LightSquared has lost the most likely buyer of its spectrum. Analyst Farrar thinks LightSquared is desperately trying to pitch itself to Sprint (s S), but Sprint has a lot of spectrum and the Clearwire partnership to worry about. Would it really get involved with LightSquared?
When asked about the idea of an acquisition on Monday during a conversation about the AT&T and T-Mobile merger, Charles McKee Sprint’s Vice President, Government Affairs, Federal and State Regulatory, said, “We don’t comment on speculation or rumor. Our primary focus will be on blocking this transaction and aggressively competing in the marketplace.” If Sprint doesn’t bite, that might leave LightSquared stuck completing the charade of building out a wholesale LTE network to cover 9 million people by the end of this year, after which, it can move on to becoming an awesome competitive force set to block the evils of a wireless duopoly controlled by Verizon and AT&T. No pressure.