PARIS — Hedge fund Harbinger Capital Partners on Feb. 7 said it is selling the remainder of its shares in mobile satellite services provider Inmarsat in a transaction likely to generate gross proceeds of more than $650 million — which is about what a Harbinger-owned satellite-terrestrial broadband project will owe Inmarsat over the next three years.
Harbinger’s LightSquared venture of Reston, Va., has agreed to pay Inmarsat $337.5 million immediately and $115 million per year, rising at 3 percent per year, in return for the use of part of Inmarsat’s L-band radio frequency over North America.
As part of what appeared to be an elaborate play to capture Inmarsat’s current business and its spectrum rights, Harbinger at one point had envisioned using LightSquared as a vehicle to purchase Inmarsat. To that end, Harbinger had purchased about 28 percent of London-based Inmarsat’s equity.
But Harbinger reversed course in 2010, selling half of its stake — 65 million shares — in October, focusing instead on the LightSquared business. LightSquared has a license to deploy thousands of terrestrial signal repeaters for use in conjunction with its satellite-based mobile broadband business, but so far has not announced committed co-investors for what the company says will be a multibillion-dollar capital expense.
More recently, two direct LightSquared competitors — DBSD North America and TerreStar, both of Reston — have been the subject of maneuvers by Harbinger and others who want to bring these two companies together to deploy a network that looks similar to LightSquared’s but in the 2-gigahertz, or S-band, portion of the radio frequency spectrum.
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This challenge to LightSquared is especially serious insofar as U.S. government agencies have voiced concern that LightSquared’s radio frequencies risk interfering with U.S. GPS positioning, navigation and timing signals. U.S. regulators have said they will not permit LightSquared to interfere with GPS, and that the company must find a way around the problem before it starts operations.
Harbinger’s Feb. 7 announcement said it was selling its remaining 64.3 million Inmarsat shares. Inmarsat stock rose more than 2 percent in Feb. 8 trading on the news. Investors apparently concluded that the long-feared “Harbinger overhang” in Inmarsat stock — meaning the threat that Harbinger eventually would cash in its investment — is now ending, and that LightSquared is likely to operate for at least several years, thus assuring its payments to Inmarsat.
Should LightSquared’s business not succeed, payments to Inmarsat would cease, but Inmarsat would regain the full use of its L-band spectrum.
