Despite Some Good News, Trying Times Continue for LightSquared

Carl Weinschenk

Investors in the LightSquared project got two pieces of news this week. One certainly will make them happy, but the other just as surely will fill them with a deep foreboding.

The good news is that the company, which is building a wholesale-only Long Term Evolution (LTE) 4G network, has agreed to work with Sprint in a 15-year deal focusing on the sharing of network expansion and equipment costs, according to Forbes. Forbes positions the deal as a competitive move as Sprint tries to keep pace with its two bigger rivals, AT&T - which is in the process of acquiring T-Mobile - and Verizon Wireless:

Sprint plans to use LightSquared to help bring its network to 4G LTE, an improvement from its current, and slower, WiMax network. The company has promised to spend $5 billion to upgrade its network over the next three to five years after losing contract customers in 14 of the past 15 quarters. An upgraded network may give subscribers an incentive to stay with the company rather than looking elsewhere for fast wireless speeds.

That's the good news for LightSquared; it's needed and will play a big role in the rapidly expanding wireless landscape. Bloomberg also reports that Cox, which abandoned plans to build its own 3G network, is in talks with LightSquared.

The other piece of news, however, is not nearly as cheery: The spectrum that will be used by Sprint is being changed out. This is analogous to announcing plans for a high-performance sports car and then adding that a different type of engine will be used.

IT Business Edge's Ainsley Jones summed up the reasons last week:

It has been found that LightSquared's LTE broadband satellite system disrupts the GPS navigation systems used for aviation, military purposes and more. Tests conducted by the National Executive Committee for Space-based Positioning, Navigation and Timing (PNT) using LightSquared's equipment and tower receivers had a negative impact on GPS systems on land and in the air.

In the wake of the findings, the main backer, hedge fund Harbinger Capital Partners, announced that LightSquared will switch to different frequencies to avoid the problem. Reuters reports that Harbinger, which is led by Philip Falcone, already has spent $3.1 billion on the project. The report, which has good background, says LightSquared "still needs billions of dollars more" and may find it hard to raise it. It also may face delays due to the move. The general reporting on LightSquared doesn't say whether it is normal for a hedge fund to get so deeply involved in actually building things.

The unavoidable conclusion to all this is that LightSquared is in a state of flux. That's good and bad. The big players haven't nixed the concept and, indeed, many have signed. But changing technology horses in midstream clearly doesn't signal stability.

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Add Comment      Leave a comment on this blog post
Jun 21, 2011 9:00 AM Tomas Bronzefield Tomas Bronzefield  says:

You haven't got a clue. 

LightSquared will be using the same frequencies it's always planned on using -- the 1525-1559 MHz band.  But, instead of lighting up LTE base stations across the full range of spectrum, it will initially restrict its operations to the lower half of the band to avoid creating harmful interference to GPS receivers. 

5 minutes of research would have prevented the distribution of patently misleading article.

Jun 21, 2011 9:20 AM Carl Weinschenk Carl Weinschenk  says: in response to Tomas Bronzefield

Tomas, Reuters is my source:

"Falcone and his Harbinger Capital Partners' investors have gambled billions of dollars on the success of LightSquared. The company said on Monday that it would now use a different block of wireless airwaves for its network than originally planned, after months of testing found the interference problems."

That said, right or wrong, there is absolutely no reason to be that rude, and I resent it.

Jun 21, 2011 11:25 AM Chris Chris  says: in response to Carl Weinschenk

I guess you don't get many trolls, that comment was well put and in no way did I find it rude.

Or maybe you don't like it when someone points out flaws.

Jun 21, 2011 11:32 AM Carl Weinschenk Carl Weinschenk  says: in response to Chris

I'm fine with people pointing out flaws but don't subscribe to the notion that it's okay to be less civil on the Internet than in person. I considered the comment rude. And you are right: We don't get many trolls.

Jun 21, 2011 5:31 PM Timothy Timothy  says: in response to Carl Weinschenk

Well Carl, you need to do some research instead of putting an article out that is negative instead of understanding facts and just reporting that.  This is not negative, this is a a positive thing and this is not changing horses midstream. 

Jun 22, 2011 4:00 PM Carl Weinschenk Carl Weinschenk  says: in response to Timothy

Thanks, Timothy. Actually, blogs like this are commentaries based on reports appearing elsewhere. That's generally accepted. (I also write features based on original reporting.) This post was based on a Reuters report, and I think it was accurate.


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