Exclusive: Falcone's wireless company running out of cash
(Reuters) - The upstart wireless company that is being bankrolled by Philip Falcone's $5 billion Harbinger Capital Partners hedge fund could run out of money during the second quarter of 2012, according to the company's financial statement.
Context & Ripple Effects
LightSquared is Philip Falcone's second swing at building a national wireless network on Harbinger Capital Partners' money — his first vehicle, Frontline, was closed for business back in January 2008. The company spent 2011 assembling the pieces it needed: a network-sharing deal with Sprint signed in June, and a public counteroffensive in August when Falcone took his feud with Verizon and AT&T to CNBC over interference objections to his spectrum.
The new disclosure changes the stakes: per the company's own financial statement, that $5 billion bankroll runs dry during Q2 2012 — meaning the buildout now has a hard deadline that lands before the regulatory fight with the big carriers is anywhere near resolved.
First-order effects
- Harbinger faces a mid-2012 funding wall: Falcone must inject more capital, restructure, or find outside investors within roughly two quarters, with the Sprint wholesale partnership dependent on that money arriving.
Second-order effects
- Sprint's network plans are exposed to a partner whose solvency is now publicly in question, while Verizon and AT&T gain leverage in the interference dispute simply by outlasting a rival that cannot fund a prolonged regulatory campaign.
Third-order effects
- If the pattern holds across both Frontline and LightSquared, single-hedge-fund-backed spectrum ventures look structurally mismatched against the capital intensity and multi-year approval cycles of national wireless builds — pushing future entrants toward carrier partnerships or consortium funding rather than one patron.
The trend: Billionaire-financed wireless upstarts are discovering that spectrum ambitions burn cash faster than regulators approve them, making deep-pocketed strategic partners a survival requirement rather than an option.