Potential Investors Circle as LightSquared Emerges from Bankruptcy

 - September 2, 2013, 12:20 AM
Fresh from bankruptcy, LightSquared still harbors ambitions to satisfy a populace insatiable for wireless broadband connectivity anywhere and everywhere.

While LightSquared emerged from bankruptcy on July 15, one of its first moves was to ask the bankruptcy judge to keep other investors at bay until December, to allow the company to complete its recovery plan. The judge allowed LightSquared until December 6 to complete the process. However, that didn’t stop one Wall Street heavyweight from raising its initial $2 billion bid to acquire the company’s assets to $2.2 billion, in a struggle between two rival billionaires: Charlie Ergen of Dish Networks; and Philip Falcone of Harbinger Investments, which owns LightSquared. Reportedly, Ergen has more than $20 billion, while Falcone is down to his last $4.5 billion, from more than $20 billion before his LightSquared venture.

In her decision, bankruptcy judge Shelley Chapman stated, “This case resists all attempts to walk in a straight line, but we’re going to keep at it.” That was prophetic, since Falcone objected to the first Dish offer of $2 billion, pointing out that LightSquared had already built in legal protection against acquisition attempts by Dish. In response, lawyers representing the two entities behind the offer stated that they were not owned by Dish but personally owned by Ergen. Falcone still refused to meet them.

What would Ergen plan to do with LightSquared, should he eventually acquire it? One avenue of speculation is that he could attempt to do what Falcone had in mind originally, but use just the power of LightSquared’s large satellite transmitter for Internet broadcasting, without the supplementary (and much more powerful) ground stations that interfered with GPS signals and led to LightSquared’s downfall. But that’s just Wall Street speculation. Like Falcone in the past, Ergen keeps his cards close to his chest.

Yet this time, Falcone is going public to round up investors to make a competing bid to Ergen’s by December 6, based on an approval he received earlier from the Federal Communications Commission (FCC) to run a LightSquared-like three-month signal-test program that would share spectrum with the federal National Oceanic and Atmospheric Administration (NOAA). NOAA owns radiosonde transmitter frequencies that are near, yet safely distant from, the GPS frequencies. It is expected that eventually NOAA would vacate those frequencies for others in higher bands. LightSquared claims that potentially those could combine with other spectrum that it can already access to provide sufficient coverage, clear of GPS, over 95 percent of its original broadband market.

LightSquared is handicapped by a debt load of more than $2 billion, of which around $600 million is now reportedly owned personally by Charlie Ergen, who has been slowly picking up LightSquared debt as disappointed owners unloaded it, at heavily discounted rates. Wall Street seems to agree that when that $600 million is resold at, or close to, par value, Ergen himself will pick up “hundreds of millions of dollars.”

And with less than four months to go to the announcement of the winning bid for LightSquared’s assets, it looks as if it might be a pretty uneven contest, with your average bookmaker giving poor odds on a Falcone victory. Another possible contender is Mexican communications billionaire Carlos Slim, the richest person in the world since 2010, according to Forbes. Slim has expressed an interest in a LightSquared-like system for Mexico, and at one time was reported to have shared interests with Ergen in that direction. More to the point, he appears this time to have been able to avoid any public speculation about his potential interest in LightSquared’s future ownership. In Wall Street, that could be significant or, just as in betting at the track, not.

Thus the LightSquared saga continues, with a surprise at every turn of the page.