LightSquared Loses Falcone For A Stay From Bankruptcy
May 1, 2012

LightSquared Loses Falcone For A Stay From Bankruptcy

Enid Burns for

Mobile communications company LightSquared isn't exactly seeing full spectrum. In fact, the wireless company has no stake in the wireless spectrum, which is just one of many problems plaguing the Reston, Va.-based company.

After several months as director, hedge fund manager Philip Falcone has agreed to step down, according to a report from the Wall Street Journal. The question is whether Falcone's exit is contingent on the company's efforts to delay bankruptcy by a week in order to negotiate a longer extension before the company defaults on its debt.

Falcone stepped into the director position at the end of February when Sanjiv Ahuja, former Orange management, stepped down as CEO. At that time Doug Smith and Marc Montagner were named as interim co-chief operating officers. Currently on the LightSquared website Sanjiv Ahuja is listed as chairman of the board; Marc Montagner is listed as interim co-chief operating officer and chief financial officer; and Douglas Smith is named as co-chief operating officer and Chief Network Officer.

Philip Falcone is the founder and senior managing director of Harbinger Capital, a private hedge fund based in New York City. Falcone appears to have taken LightSquared on as his pet project. The hedge fund he oversees has invested a reported $3.8 billion in capital into LightSquared. That's an estimated 60 percent of the Harbinger Capital hedge fund capital.

In addition to capital, several efforts have been made to keep LightSquared afloat. Though not all of these efforts are business-as-usual.

Since the beginning of 2012 LightSquared has called a government committee biased when it declined to continue testing on high-precision devices on the GPS spectrum; called testing on GPS devices "rigged by the GPS industry; called on the FCC to initiate receiver reliability standards to set a level playing field for spectrum devices and publicly said the FCC's proposal would undermine wireless investment and create regulatory uncertainty.

That only covers the company through mid-March.

On March 30 LightSquared issued a release that said "Proposed FCC ruling is legally unprecedented, not supported by technical evidence, and inconsistent with other recent commission action." The company is fighting its downfall, but appears to be doing so kicking and screaming.

LightSquared's business is building an open wireless broadband network. The company plans to do so by setting up an LTE (Long Term Evolution), 4G network, which it will offer under a wholesale-only business model. Most companies operating a 4G LTE network do so with some ownership of the broadband spectrum. LightSquared does not have any spectrum holdings. It operates on the same band as GPS devices. It's operations on the GPS band has created messy business operations for LightSquared.

This most recent event may be LightSquared's turning point, or its last hurrah. The company is one week away from defaulting on its debt, which will take it into bankruptcy territory. Falcone's exit may be enough to grant the company time to negotiate better terms to settle its debts, and possibly continue operations. LightSquared is already operating on a debt-term violations waver, which expires Monday according to the Wall Street Journal.