LightSquared, Inmarsat Begin L-Band Consolidation, Swap
LightSquared paid Inmarsat $337.5 million to begin the process of consolidating terrestrial L-band spectrum that LightSquared plans to use for its 4G network, the companies said Wednesday. The process for opening up the spectrum for use by LightSquared has been in place since 2007, when the company was known as SkyTerra. LightSquared has paid an initial $81.25 million to Inmarsat.
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By triggering Phase 1 of the agreement, Inmarsat and LightSquared will clean and swap their intertwined L-band spectrum in the U.S., creating “more contiguous spectrum” in the band, said a LightSquared spokesman. The process will make an additional 10 MHz of L-band spectrum available for use by the company, which is investing heavily in creating a 4G wireless broadband network with integration ability with LightSquared’s satellite network. Neither company currently uses the L-band terrestrially, they said. LightSquared will pay $40 million every 3 months for 15 months and an additional $56.25 million upon completion of Phase 1. LightSquared doesn’t expect to take on additional costs beyond what it is paying Inmarsat during Phase 1, LightSquared Chief Network Officer Drew Caplan said in an interview.
LightSquared also has the option to implement a second phase, which would make available an additional 20 MHz of spectrum for the network. If LightSquared exercises that option, which it has until 2013 to decide, it will pay $115 million per year for an expected two and a half years, said LightSquared. LightSquared expects to exercise this option, said the spokesman.
The FCC provided SkyTerra/LightSquared an ancillary terrestrial component rules waiver in March (CD March 30 p1), paving the way for the process. No further regulatory approval is needed, said Caplan.
Phase 1 is expected to take up to 18 months, LightSquared said. The process is also a preventative measure to protect Inmarsat subscribers from interference from LightSquared’s network even though the network isn’t expected to be deployed for another year, said Inmarsat Vice President Diane Cornell. Implementing the necessary protections is expected to be the hardest part of the process for Inmarsat, she said. LightSquared, owned by hedge fund Harbinger Capital Partners, has said it hopes to begin service starting in the second half of 2011. The commission signed off on Harbinger Capital Partner’s acquisition of SkyTerra (CD March 30 p1) based on a commitment to build out its network to at least 100 million people by the end 2012 and 260 million before the end of 2015.
"We anticipate that determining whether any equipment modifications are necessary to ensure Inmarsat users don’t experience interference from the LightSquared network and deploying those modifications as necessary will be the biggest cost component we will face,” said Cornell. Still, it isn’t yet clear how much funding from the payments will be required to cover the costs associated with making more contiguous blocks of spectrum available to LightSquared, said Cornell.