LightSquared wins a week to hash out a longer debt deal

A pact with lenders over its $2 billion debt might reduce hedge-fund chief Philip Falcone's role

Lenders to would-be mobile data carrier LightSquared have given the company another week to meet its debt obligations while talks continue on a longer reprieve that would give LightSquared more time to win FCC approval, according to a person familiar with the discussions.

The negotiations could affect the future role of Philip Falcone, the head of LightSquared's primary owner, Harbinger Capital Partners, but no final agreement has been reached, the person said. According to this person, the talks have included discussions of Falcone eventually leaving LightSquared's board and agreeing not to become an officer of the company.

LightSquared was formed in 2010 after Harbinger acquired SkyTerra and part of TerreStar, both satellite mobile data providers. It operates a satellite-based service and had planned to build a land-based LTE network, then sell the capacity of both systems to other carriers on a strictly wholesale basis. However, after tests showed interference between the LTE network and GPS receivers, the U.S. Federal Communications Commission announced plans in February to kill the land-based component.

That left LightSquared with about US$2 billion of debt and without the network that was to have generated most of its revenue. The carrier has said it believes the issues before the FCC can and should be resolved, but most observers believe that could take years. Falcone said earlier this month that the company has enough capital to operate through this year but that he was not ruling out a bankruptcy filing.

Falcone has never been an officer of LightSquared and joined its board only after the departure of former CEO Sanjiv Ahuja, which left a vacancy on the board. Falcone considers his board participation temporary, and leaving the board or committing not to become a company officer are not inconsistent with his long-term intentions, according to the source.

LightSquared declined to comment.

LightSquared wants a debt extension as long as two years. But even that might not be enough time to get permission to build the network, said Keith Barker, president and CEO of satellite engineering consultancy Questiny Group. Barker believes the only likely solution, though it is a long shot, would be swapping LightSquared's current spectrum with another band that doesn't present the same type of interference issues.

"I think the issue is, can you hold out long enough to do that?" Barker said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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