LightSquared isn’t just fighting the government and the GPS industry for the right to build its nationwide LTE network; it’s also fighting the clock. In a financial statement released to Reuters, (s tri) LightSquared revealed it may run out of cash by the beginning of the second quarter of 2012. Unless it can raise more funding, it won’t be able “continue as a going concern,” Reuters reported. Given the huge backlash against LightSquared due to interference problems its network would cause among the country’s GPS receivers, there’s little likelihood the would-be 4G operator will get a green light from the Federal Communications Commission in three months, leaving the company floundering.
FCC approval would be the trigger for new investment, since only the most risk-loving investors would plow cash into a wireless operator that may never own a network. LightSquared hopes to use its former SkyTerra satellite spectrum to build a massive LTE network, capacity from which it would wholesale to other carriers, device makers and retail and media brands. But GPS device makers, led by Trimble Navigation(s trmb) and Deere & Company(s de), and the government agencies overseeing the global positioning network maintain LightSquared’s high-powered LTE network would overpower much more sensitive GPS receivers, wrecking havoc with millions of devices that depend on the satellite network for location and timing information. While LightSquared has scaled back its deployment plans several times to try to mitigate those interference problems, government and GPS industry studies have all but concluded that no network the operator built — no matter how scaled down – would leave GPS unharmed.
LightSquared has asked for further testing, taking into account its latest network revisions, but a new round of tests will take months to plan and implement. Meanwhile, LightSquared is shedding cash. The operator registered a $427 million loss in the first nine months of the year, while it generated only $30 million in revenues from its satellite broadband business, according to Reuters. While LightSquared has signed up 33 wholesale customers to buy its future LTE capacity, including big names like Best Buy (s BBY) and Sprint(s S), it likely won’t see a dime from those partners until it actually has 4G capacity to sell. Instead, LightSquared has payments to one key partner Sprint coming due. Sprint is hosting its LTE systems over its new radio-agnostic Network Vision architecture and expects to get paid for that service. According to Reuters, LightSquared has a $500 million to $700 million Sprint payment coming due, as well a $310 million debt payment to honor.
LightSquared’s funding hopes would normally rest with investor Philip Falcone, whose hedge fund Harbinger Capital Partners has committed $3 billion to company and is its principal owner. But Falcone has problems of his own right now, as he faces down an SEC investigation and freezes withdrawals from his hedge fund. If LightSquared can’t get more cash, it may look to sell off its primary asset, its spectrum, but its doubtful it could get a good price for those airwaves given the cloud that currently hangs over them. If it were to get FCC approval to launch a terrestrial LTE network, those L-band licenses would be worth billions, but if it fails to win that approval, the spectrum could only be used for satellite services, which would slash their value immensely.