MSV Needs Another $400 Million

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  Space News Business

MSV Needs Another $400 Million

By PETER B. de SELDING
Space News Staff Writer
posted: 12 March 2008
02:52 pm ET




PARIS — Mobile Satellite Ventures (MSV) said March 7 it will need up to $400 million in additional cash by the end of 2009 to complete the construction and launch of its first satellite and to continue work on an identical second spacecraft.

Both satellites are under construction at Boeing Satellite Systems International and rescheduled for launch in late 2009 and sometime in 2010.

Reston, Va.-based MSV, which is owned by SkyTerra Communications Inc., currently has some $375.7 million in cash and cash equivalents following a fresh investment, totaling $150 million, by Harbinger Capital Partners of Birmingham, Ala.

In a March 6 conference call with investors, MSV Chief Executive Alexander H. Good said the company has enough cash to continue making payments to Boeing and to meet its other obligations through March 2009.

MSV is building an advanced mobile satellite system using two satellites - one registered in Canada, one in the United States - to provide commercial and public-safety services in North America.

MSV is one of several companies seeking outside investors to help finance rollout of Ancillary Terrestrial Components (ATC) to assure that the service works through terrestrial wireless links where the satellite signal does not penetrate. ATC investment would entail installing hundreds, and perhaps several thousand, signal generators in cities and other places where line-of-sight view of a satellite is obstructed.

To date, neither MSV nor any of the other satellite-ATC companies has secured this necessary outside investment, but they all are continuing construction of their high-powered satellites in both L- and S-band.

These companies had hoped that a recent U.S. government auction of terrestrial wireless spectrum licenses would whet the appetites of telecommunications or Internet companies for investment in MSV and the other satellite-ATC players.

It has not yet happened, and Good conceded that the so-called 700-MHz auction managed by the U.S. Federal Communications Commission was not all good news for MSV. The Federal Communications Commission had ordered that winners of one of the major spectrum blocs offered in the auction, Bloc D, include a dual-mode satellite and terrestrial handset in their business plans as part of a service for emergency response and other public safety services.

But the auction recently concluded with no bids for Bloc D that met the Federal Communications Commission’s minimum threshold.

“The Bloc D debacle casts doubt on any company’s plans to have public service agencies pay for the operating costs of their satellite-ATC systems,” said Tim Farrar, president of TMF Associates, a telecommunications consultancy in Menlo Park, Calif.

“Public service agencies don’t like to pay monthly service charges, and this is what MSV and TerreStar [an MSV competitor planning its own satellite-ATC system] have been counting on,” Farrar said March 7. “So these companies’ models may not be feasible.”

Scott Macleod, MSV’s chief financial officer, conceded during the conference call that “the D-Bloc could have been a catalyst” for prospective strategic investors in MSV because of the Federal Communications Commission requirement that this portion of the spectrum include a satellite component.

Good said the D-Bloc results represent “an opportunity and a challenge,” and that outside investors might view MSV as offering a complete system for use by public safety and commercial customers. But he said this portion of the auction “raises lots of questions.”

MSV’s
immediate concern is securing the needed cash to continue construction of its two satellites. The company has said it would seek vendor financing or stretched-out contract payments from Boeing, and industry officials say selling equity to Boeing or to another investor is also an option.

MSV and competitor Inmarsat of London - in which Harbinger also owns a large stake - in December reached an agreement that Good described as clearing the way to a more rational sharing of the L-band spectrum over the United States.

The agreement calls for MSV to pay Inmarsat $250 million in cash and $87.5 million in MSV equity to offset the costs Inmarsat will incur in modifying its customers’ terminals to permit MSV to consolidate the L-band spectrum it already has into a single bloc. This option must be exercised by Sept. 1, 2011.

In a second phase, if MSV wishes to use some of Inmarsat’s spectrum over North America, it agrees to pay Inmarsat $115 million per year.

“We don’t intend to trigger Phase 2 without distribution partners” who have invested in the satellite-ATC rollout, Macleod said.

Before the Inmarsat agreement is set into motion, however, MSV must reach agreement with Mexican government authorities over L-band spectrum in the United States. Mexico operates an L-band satellite payload and, like MSV, is one of the parties that signed a 1996 agreement on L-band spectrum coordination for North America. It is unclear when MSV and Mexico will reach an agreement.