Harbinger Enlists Nokia Siemens as Hybrid Network Partner

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BREMEN, Germany — U.S. hedge fund Harbinger Capital Partners on July 20 said it has entered into a $7 billion, eight-year agreement with Nokia Siemens Networks to build, install and operate its terrestrial-satellite mobile broadband network in the United States after Harbinger raised $1 billion in additional financing.

The agreement, which will be submitted to both companies’ boards of directors for approval in the coming weeks, fills in part of the still-cloudy picture of Harbinger’s ambitious system deployment plan since the company guaranteed its schedule to the U.S. Federal Communications Commission (FCC) in a document the FCC disclosed in March.

In exchange for the FCC’s approval of Harbinger’s acquisition of SkyTerra of Reston, Va., which is building two large L-band mobile services satellites, Harbinger promised that the multibillion-dollar ground network, consisting of some 40,000 cellular towers to work in concert with the satellites, would reach 260 million Americans by 2015.

Initial commercial service in some areas would start as early as September 2011, Harbinger promised the FCC.

Harbinger earlier had agreed to invest $2.9 billion into SkyTerra, which has been renamed LightSquared. The company also has agreed to inject an additional $750 million in equity. To this sum will be added $1 billion in debt or equity whose source Harbinger and LightSquared declined to name.


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LightSquared/SkyTerra spokes-|man Tom Surface specifically declined to say whether the anticipated Nokia Siemens contract includes an equity investment or vendor financing by the telecommunications networking provider.

The LightSquared announcement came one day after Nokia Siemens of Espoo, Finland, announced it had purchased, for $1.2 billion, the wireless-infrastructure assets of Motorola Inc.

LightSquared is headed by Sanjiv Ahuja, a former chief executive of mobile telecommunications provider Orange Group of France.

LightSquared reconfirmed Harbinger’s earlier guarantees that it would operate a wholesale-only business and would not compete with its customers, expected to include cellular network operators, Internet service providers and cable operators.

Despite its investment in LightSquared, which it acquired in April, Harbinger has not announced any co-investment by strategic partners, nor has it said whether it has made required payments to mobile satellite services provider Inmarsat of London to coordinate the use of L-band spectrum in the United States. Inmarsat has said it will take it months of work to modify its customers’ hardware in the United States to prepare for LightSquared, and that the work would begin only when the first payment tranche arrives.

Unresolved financial issues aside, the investment by Harbinger and the creation of LightSquared are a rare bright spot in the FCC’s attempts to secure a stable long-term mobile satellite services industry in the United States for rural and emergency communications.

Harbinger’s interest and the development of LightSquared were made possible by the FCC’s agreement to permit radio spectrum licensed to U.S. mobile satellite operators to be used for terrestrial networks as well, so long as the system maintains a satellite service.

The LightSquared network will take advantage of relaxed U.S. regulations that are expected to permit partners to offer services and hardware that are not capable of using satellite links alongside dual-mode terrestrial-satellite services as well as satellite-only functions, SkyTerra/LightSquared said. Allowing equipment makers to build terrestrial-only gear is expected to reduce overall system costs and make it easier for LightSquared to attract customers.

Globalstar Inc. of Milpitas, Calif., which operates a constellation of satellites for global mobile communications, plans a similar network in the United States.

“[T]he transaction announced by Harbinger … is further validation of the … marketplace in the United States,” Globalstar Chairman Jay Monroe said in a July 21 e-mail. “With Open Range Communications rolling out its network using Globalstar’s L and S bands and now Harbinger developing its L band, substantial sums of money are now going directly into hybrid networks. Both of these deployments also advance the aims of the U.S. National Broadband Plan.”

The two SkyTerra/LightSquared satellites are under construction by Boeing Space and Intelligence Systems of Seal Beach, Calif. Surface said Boeing recently notified the company that delivery of the first satellite, expected by late this summer, would be delayed, pushing the launch of SkyTerra 1 until either December 2010 or the first three months of 2011.

“In the meantime, SkyTerra services will continue to be provided by our two current generation satellites already in orbit and operational, with no impact on our ongoing services. Service planning for our next-generation network continues on schedule, despite this satellite launch delay,” SkyTerra/LightSquared said in a July 19 statement.