SkyTerra Buyer Commits to Multibillion-Dollar Ground Network

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PARIS — A U.S. hedge fund that has invested in three mobile satellite services providers and is acquiring full control of one of them is guaranteeing to U.S. regulators that it will spend several billion dollars, starting immediately, to deploy a nationwide mobile-broadband network that will reach “at least 260 million people” by early 2016.

Harbinger Capital Partners, whose purchase of mobile satellite services provider SkyTerra was approved March 26 by the U.S. Federal Communications Commission (FCC), agreed as a condition of the deal to an aggressive roll-out of services using ground-based signal boosters employing the same L-band radio spectrum to be used by the two SkyTerra satellites planned for launch in the next 12 months.

“Excluding satellite coverage, Harbinger has committed to a build-out schedule of its 4G terrestrial network that will provide coverage in the United State to at least 100 million people by Dec. 30, 2012, at least 145 million people by Dec. 31, 2013, and at least 260 million people by Dec. 31, 2015,” the FCC said in its March 26 approval Harbinger’s takeover of SkyTerra.

The FCC order includes a seven-page letter from Harbinger’s legal counsel of Goldberg, Godles, Wiener & Wright reiterating roll-out milestone guarantees that Harbinger had given to the FCC in late February during the commission’s debate on the SkyTerra purchase.

The letter does not say how much Harbinger expects to spend to install some 36,000 terrestrial base stations along with consumer handsets, network operations centers and other pieces of the mobile-broadband network. But industry officials, using the experience of cellular network operators, have estimated the necessary capital investment at several billion dollars.

Tim Farrar of TMF Associates of Menlo Park, Calif., said in a March 28 e-mail that a project such as this is likely to carry a $4 billion capital cost through 2013 if Harbinger is to meet its deadlines.

In addition to now owning all of SkyTerra, New York-based Harbinger owns some 44 percent of TerreStar, whose large S-band satellite was launched in 2009; and 29 percent of London-based Inmarsat, the veteran mobile satellite services provider.

Harbinger in 2008 had announced a plan to have SkyTerra purchase Inmarsat in a combination of two L-band mobile-satellite competitors. Those plans do not figure in Harbinger’s FCC letter. But Harbinger does plan to use parts of Inmarsat’s L-band spectrum to increase the bandwidth offered by its terrestrial network. In a December 2007 agreement, SkyTerra agreed to pay Inmarsat $115 million per year for the use of this spectrum in North America — a cash windfall for Inmarsat, especially since the company has no current plans to roll out its own combined terrestrial-satellite network.

Using spectrum licensed to SkyTerra by virtue of the company’s investment in its satellites, plus the Inmarsat spectrum and other frequencies that Harbinger has secured separately, the proposed network would be a wholesale distributor of mobile-broadband capacity for cellular network operators, manufacturers of mobile handsets and personal computers and other consumer-electronics providers, according to the Harbinger disclosures to the FCC.

Harbinger did not disclose the identity of its co-investors in the network.

If the Harbinger network is developed as planned — and if it is not, the FCC will annul the SkyTerrra acquisition — it will mean the end of a decade-long wait by U.S. regulators to secure a financially viable future for mobile satellite services in the United States.

Before Harbinger and its chief executive, Philip A. Falcone, came on the scene, cellular pioneer Craig O. McCaw had persuaded the FCC that no mobile satellite operator in the United States could survive unless it was allowed to use, free of charge, its satellite spectrum to deploy terrestrial towers to assure wireless connectivity in places satellites cannot reach.

Despite the broadening coverage of terrestrial wireless technologies including WiMAX and LTE (Long-Term Evolution), U.S. regulators believe that for disaster-recovery and emergency assistance, the United States needs a mobile satellite services provider.

The FCC’s agreement to permit mobile satellite operators to deploy such a terrestrial network — called an Ancillary Terrestrial Component (ATC) — on condition that they maintain a satellite service paved the way for a Wall Street fascination with ATC potential.

McCaw and his partners spent well over $1 billion through mobile services startup ICO Global. ICO has gone through one bankruptcy and now, through its North American affiliate DBSD North America, is in the middle of another Chapter 11 bankruptcy reorganization.