TerreStar Gets $300 Million in New Investment

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  Space News Business

TerreStar Gets $300 Million in New Investment

By PETER B. de SELDING
Space News Staff Writer
posted: 13 February 2008
02:57 pm ET





PAris



Start-up mobile satellite services provider TerreStar Corp. has been thrown a $300 million lifeline in new investment from the newly reorganized EchoStar Corp. and by private-equity investor Harbinger Capital, which in recent months has been multiplying its investments in mobile satellite service providers.

But TerreStar also disclosed Feb. 7 that the launch of its first satellite has been delayed again, this time by at least three months, to no earlier than between December and late February 2009.

In a Feb. 7 filing with the U.S. Securities and Exchange Commission (SEC), TerreStar includes a letter from satellite prime contractor Space Systems/Loral saying the TerreStar-1 satellite may face further delays as Loral struggles with development of its innovative S-band feed antenna. The satellite had been scheduled to leave Loral’s Palo Alto, Calif., production facility in August, for an




fall launch aboard a European Ariane 5 vehicle.

The letter, written by Space Systems/Loral Chief Executive C. Pat DeWitt, says TerreStar-1’s S-band feed antenna “continues to pose a significant delay risk … Our current schedule calls for a November 2008 delivery date, but … that date remains at risk until additional testing is complete.”



The Evry, France-based Arianespace launch consortium, in a separate letter, acknowledges the TerreStar-1 delay and says TerreStar has requested a launch between Dec. 1 and Feb. 28.



Reston, Va.-based TerreStar announced Feb. 7 that EchoStar and Harbinger, and other




unnamed TerreStar investors, have agreed to invest $300 million into TerreStar, with $200 million of it being available immediately.

The money will permit TerreStar to complete development and launch of TerreStar-1. TerreStar had said that




without new investment it would run out of cash toward the end of this year.

The $100 million in additional




cash that will be




made available




will be used to begin work on a TerreStar-2 satellite. Having a backup satellite completed within a year of the start-up of TerreStar’s commercial operations is a requirement of the company’s U.S. Federal Communications Commission license.

Beyond the financial breathing room it offers, the EchoStar investment is also the first clear signal from a non-Wall Street investor of support for the business model on which the success of TerreStar and several other mobile satellite services providers is based.



“This announcement is a big event to the extent that we have a real strategic investment in this ATC sector rather than just a financial investor,” said Tim Farrar, president of TMF Associates, a telecommunications consultancy in Menlo Park, Calif. ATC, or Ancillary Terrestrial Components, are the ground towers needed to assure continued mobile communications in areas such as cities and in buildings, where satellite signals cannot reach.

“My sense is that EchoStar is putting in some money to find out about how these systems work, to understand the business and what customers want – to have a seat at the table,” Farrar said in a Feb. 8 interview. EchoStar’s investment in TerreStar totals $150 million. Harbinger is investing $100 million, and $50 million is coming from other investors.

As is the case with ICO Global, Mobile Satellite Ventures and to a lesser extent, Globalstar Inc., TerreStar is counting on finding a partner willing to make a multibillion-dollar investment in an ATC ground network that will use its spectrum.

ICO Global is waiting for the same kind of investment in S-band, where TerreStar also expects to operate. Mobile Satellite Ventures and London-based Inmarsat have similar business ambitions, but in L-band.

The EchoStar entity making the investment is not the company that provides satellite-television services in the United States. EchoStar has recently split into two companies, one to continue the Dish-branded television service, and the other to market EchoStar-built television set-top boxes and the company’s satellite capacity that is not used for the existing television business.

EchoStar




also has invested in a future S-band mobile satellite service in China, called CMBStar, and in South Korea’s existing TU Media mobile-satellite business.

Harbinger Capital, based in Birmingham, Ala., is already a major investor in the two L-band mobile satellite systems, Mobile Satellite Ventures and London-based Inmarsat, and was instrumental in brokering a spectrum-sharing deal announced in December by those two companies.