LightSquared Running Out of Cash, Time as Investor Sharks Circle

Thursday Jan 19th 2012 by Wayne Rash

NEWS ANALYSIS: Beleaguered LightSquared suffers another hit as government testers find GPS interference and the company responds by claiming tests were rigged. Meanwhile, investor Carl Icahn closes in for the last big bite of the failing company.

You know that a company is failing when the investment sharks start to circle. The biggest shark of all, Carl Ichan, has purchased $300 million in LightSquared debt. If LightSquared runs out of money, which could happen as early as April, this would effectively give Ichan ownership of LightSquared's spectrum. Ichan, appearing to have no interest in using the spectrum, would presumably resell it to recover the value of the debt.

But a looming cash crisis may be the least of LightSquared's troubles. The latest round of tests by the National Space-based Positioning, Navigation and Timing Executive Committee demonstrated that the LightSquared Long Term Evolution (LTE system) would interfere with GPS to a significant level and that the interference could not be corrected.

The group said in a Jan. 13 letter to Lawrence Strickling at the Commerce Department that no further testing was recommended because no practical solutions appear to be available. The nine government agencies and departments that make up the committee were unanimous in that recommendation.


Sprint is about to pull the plug on LightSquared in a different way. Sprint had agreed to build LightSquared's terrestrial LTE network, provided the company got regulatory approval by the end of 2011. As that deadline approached, Sprint gave LightSquared another 30 days. This means that Sprint's deal with LightSquared is off in less than two weeks. There's no indication that Sprint will provide another extension.

LightSquared, meanwhile, has charged that the government tests were rigged, and that one of the people involved with testing had an interest in the outcome, creating a conflict of interest. The company also said the tests were invalid because some of the GPS receivers being tested were no longer in production.

LightSquared is, of course, grasping at straws. Every test, including some run by the company itself, showed interference with GPS, but LightSquared suggested that this interference could be overcome by adding filters to GPS receivers that were affected. What the company didn't say is how it planned to install such filters on virtually every GPS device in existence or who was going to pay for it.

LightSquared also performed no testing to show how those filters, if installed, might affect the operation of existing GPS receivers. Normally, radio frequency (RF) filters of the type suggested by LightSquared substantially attenuate the radio signals they pass. Given the very weak signal levels from GPS satellites, it's highly possible that the filters would render the GPS receivers as useless as the interference they're intended to prevent.

Now that LightSquared seems to have lost the last technical battle, it's ramped up the political battle. The company has launched a new round of ads touting its would-be service, and it's ratcheted up its lobbying effort.

 

Unfortunately, LightSquared is going to have to find a sugar daddy in someone who isn't running for re-election. It's hard to believe that anyone in Congress is going to anger millions of GPS owning voters in an election year, regardless of how much money is stuffed into various PACs.

At this point it would seem that LightSquared is running out of options. The panel that tested its technology said it interferes with GPS. The Federal Communications Commission granted LightSquared the right to use the spectrum under an absolute requirement that it not interfere with GPS. The company, meanwhile, is claiming that it owns the radio spectrum in question, but in reality, the frequencies were originally allocated for satellite mobile operations. When LightSquared found out that its technology needed ground-based repeaters to work, it effectively tried to convert a satellite frequency to a terrestrial frequency. In the process, it decided it needed approximately 40,000 high-power ground-based transmitters.

"LightSquared does not like the test results, so it is attacking the testers," said Jim Kirkland, vice president of Trimble Navigation and a member of The Coalition to Save Our GPS, a group opposed to the LightSquared plan. "Last Friday's report reflects the unanimous view of nine different federal government departments and agencies that LightSquared's proposals would interfere with critical functions, including the Department of Defense, the FAA and the Department of Homeland Security. The technical evidence speaks for itself."

LightSquared, in its statement challenging the test results, has asked the FCC to take over the testing itself. This is something that the FCC has already said it won't do, and the PNT executive committee was formed by the government for specifically that purpose.

Now that Sprint has set a deadline that LightSquared can't meet, it would seem that its days are numbered. The tests have shown that its technology doesn't work as the company promised it would. It hasn't shown a realistic means of preventing interference on a massive scale, and it's about to lose the support of Sprint, which was originally planning to build the terrestrial portion of the network.

What's left? Not much. It's hard to imagine a sane investor pouring more money into what appears to be a lost cause unless their goal is to gobble up the remaining assets, such as the spectrum, for pennies on the dollar. Now that Ichan has bought some of the LightSquared debt, it seems like he's taken what is probably the fatal bite. The only remaining question is how long it will take LightSquared to finish bleeding to death and expire. 

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