It was truly inevitable that after last quarter’s final regulatory defeat over the GPS interference issue we would see LightSquared on the ropes. That is what the word is out there in the media today with bankruptcy is looming large as an option, with Philip Falcone himself quoted by Reuters as ‘seriously considering’ a voluntary filing.
But seriously, what else is there for them at this point except lawsuits and layoffs? They are a wholesale LTE wireless company without a network and without permission to use their spectrum to build one, and no particularly likely path to gain that permission in time to do anything with it no matter how many angry PRs and briefs they file in the meantime. Their wholesale partners are already making alternative arrangements, they’re not about to wait around to see what happens next.
At this point it’s a question of which stakeholders escape with a bigger share of what’s left in LightSquared’s coffers. They’ve already missed payments to Inmarsat for that spectrum they can’t even use. While LightSquared talks of renegotiating terms, there isn’t really much to negotiate here that has anything to do with the wireless business itself anymore. It’s just a matter of holding onto cash to improve a losing bargaining position when it comes to divvying up what’s left.
Creditors putting on pressure include a hedge fund run by Carl Icahn, who is not exactly known for his generosity when it comes to troubled countries. It’s unclear just what Icahn’s plans are for the debt stake he bought a few months back, but it’s not likely to mean anything good for the remaining employees. They cut staff by 45% back in February, but I suspect those not yet affected had best keep their resumes up to date if they aren’t already. There aren’t many realistic alternative endings to this story.