LightSquared’s Fate Could Be Decided Within Weeks, Here’s What’s At Stake

falcone grassley

It may soon be the day of reckoning for Phil Falcone’s embattled telecom venture LightSquared.

The firm is currently fighting for FCC approval to sell its services commercially amid allegations that the satellite broadband network interferes with GPS systems and rumours that the company’s funding may run dry sometime this year.

Bear in mind that Falcone’s Harbinger Capital has nearly $3 billion invested in the company. Furthermore, LightSquared could see more roadblocks as a federal investigation into how the firm may have garnered preferential treatment through lobbying practices and influence in the White House heats up.

All that stands between LightSquared and the FCC decision is a pending recommendation letter from the National Telecommunications & Information Administration, which has been conducting tests on LightSquared’s 4G broadband network. The NTIA letter will likely be sent next week, after which a FCC decision should be handed down within weeks, according to Tim Farrar, a telecommunications consultant who has been following the LightSquared situation. A Harbinger Capital spokesperson told Business Insider that there is no specific schedule for FCC approval.

But based on leaked test results that showed LightSquared’s incompatibility with GPS systems, it is likely the NTIA will recommendation will say LightSquared does not meet the standards for commercial wholesale. And in the past, the FCC has typically ruled along NTIA suggestions.

“Legally the FCC can overrule NTIA and do something different. Politically whether they can do that at this point in time is another question,” Farrar told Business Insider.

If LightSquared does not obtain FCC approval, it’s likely that could be considered a “material adverse change,” which could allow holders of LightSquared debt to to force the company into bankruptcy, Farrar added. Prominent names that have been picking up LightSquared debt on the cheap lately include activist investor Carl Icahn, Appaloosa’s David Tepper and Beal Bank’s Andrew Beal.

LightSquared’s survival essentially hinges on FCC approval, and that’s not looking very likely right now. The company was initially hoping that its 4G broadband network would be up and running by this year, according to Farrar.

LightSquared has come out against the government tests on its networks’ effect on GPS system—alleging results and testing methods were rigged—and has filed a complaint. But it’s unclear how much that will affect the FCC decision, though it could give the company a leg up if it continues to seek legal action when the LightSquared network isn’t approved.

Calls to the FCC for comment were not returned at the time of the story’s publishing.

Further complicating matters is is the release of a letter sent to Falcone from Senator Chuck Grassley (R-IA)—who is leading the LightSquared investigation within the Senate Judiciary Committee. Grassley publicized a line of communication his office had with Todd Ruelle, an executive at Fine Point Technologies. The communication suggested that Ruelle had offered Grassley a “quid pro quo” [via DealBook]. Ruelle stands to make a profit if LightSquared is approved, and hinted there may be a call centre—meaning jobs—set up in Iowa. Ruelle had previously contacted Sen. Grassley saying “I believe I can make this into a win for the Senator, Lightsquared and the consumer.”

In addition, a house hearing on the FCC’s involvement with LightSquared was announced today, according to Bloomberg. The hearing will likely look into the FCC’s decision to grant LightSquared a waiver to continue terrestrial-only devices last year (despite a previous ban on satellite companies offering land services)—despite the fact that the Department of defence had asked the FCC to wait on the waiver.

Although all this action on the political front does not ultimately have a hand in the FCC decision, it will make it harder for the FCC to overrule the NTIA, Farrar said.