LightSquared Buys Time From Inmarsat
Apr 23, 2012 10:50 AM PT
LightSquared made an outstanding payment to Inmarsat Friday for Phase 1 of its spectrum agreement. It received an additional two years to seek federal approval before it must pay for the second phase of the deal.
Previously, Inmarsat had said it wasn't certain it would receive any more payments from LightSquared, especially after the Federal Communications Commission announced the wireless venture was interfering with global-positioning systems.
On Friday, though, LightSquared and Inmarsat announced the two had come to an agreement. LightSquared paid Inmarsat an outstanding US$56.3 million, and Inmarsat allowed LightSquared an additional two years to seek federal approval for its network before it must hand over the second phase of payments.
LightSquared now has until March 31, 2014, to shell out a $29.6 million spectrum rental payment that was supposed to be due March 31 of this year. If the company wants, it can restart before that.
"We feel it is a significant win for both organizations," Tom Surface, director of internal communications and corporate social responsibility at LightSquared, told the E-Commerce Times.
Still Waiting on FCC
LightSquared has had a bumpy road on its quest to create a nationwide 4G wireless communications system. The venture, backed by billionaire Philip Falcone, has already invested more than $4 billion in 4G LTE terrestrial technology for its high-speed, wholesale network.
However, various groups, including the National Telecommunications and Information Administration, allege that the technology seriously interferes with GPS signals, a claim LightSquared has attempted to disprove. The FCC offered LightSquared a conditional waiver to continue in its venture but said the technology needed testing to make sure any GPS interference would stop. In February, the commission said it was considering canceling the conditional waiver, which would effectively suspend the LightSquared initiative. The FCC has heard arguments from both sides of the case and has not yet issued an opinion.
LightSquared previously aimed to serve 100 million Americans by the end of 2012 and jump to 260 million by 2016. The company declined to comment on when or if those goals would be fulfilled, but it said the extra time allowed in the current agreement with Inmarsat was much appreciated.
"Specifically for LightSquared, it provides us the opportunity to continue to focus on obtaining the necessary regulatory approvals we need to build our nationwide wireless broadband network," said Surface.
Could Be a Win-Win
"This is a very sensible thing for us to do," Chris McLaughlin, vice president of external affairs for Inmarsat, told the E-Commerce Times. "The key thing is whether or not we're better off helping them to keep going, or letting them fall aside, so from that perspective, it made excellent sense to help them. The objective would be to restart much earlier than March 2014, once they've got their other issues dealt with."
Investors seemed to like Inmarsat's decision, as the stock made gains Friday after the announcement.
"There was an uptick of about 20 cents on the share price, and I think the emphasis there was on clarity, since we had said before that we didn't think there were going to be any more payments," said McLaughlin.
Although Inmarsat doesn't have control over whether or not LightSquared will ultimately win federal approval to launch the high-speed network, McLaughlin said if it can, Inmarsat wants to make sure it's the one backing the wireless provider.
"This sends a message that any business in the spectrum area needs to be coordinated with Inmarsat, and any solution that's going to happen with LTE happens with Inmarsat. That's the real thinking behind this deal," he said.