Does Icahn Have Plans For LightSquared?

January 19th, 2012 by · 7 Comments

What is billionaire investor Carl Icahn doing snooping around LightSquared’s debt? That’s what reports are saying, apparently he and Andrew Beal and David Tepper have purchased $300M of the prospective LTE upstart builder. Buying up debt at a company’s weakest moments is a common way for Icahn to gain control of troubled assets.

LightSquared is sitting on spectrum worth $4B that it can’t use for LTE without final FCC approval that the potential for interference with GPS is solved. That approval seems increasingly unlikely now, but for an owner with more staying power and a new plan for the spectrum I suppose it could be an opportunity. As I’ve been saying, the GPS industry may succeed in stopping LightSquared, but spectrum is scarce and sooner or later they’re going to have to compromise.

But Icahn buying more telecommunications stuff? A reader sent in thoughts that he might combine it with XO, which itself is sitting on a pile of higher frequency backhaul spectrum and quite a lot of metro fiber in urban areas. A wholesale wireless network built on top of those assets might be an overall better idea than what Falcone conceived.  It’s an interesting vision

But I just don’t buy it for the simple reason that it’s hard, and Icahn doesn’t do hard. That scenario would require him to invest or raise many, many more billions of dollars in a project that is definitely not a sure thing, create jobs, actually build something new, and nurse it into something that makes a profit.

It’s just far less likely than the idea that he thinks he can get spectrum cheap now that he knows AT&T is going to need badly enough to fight the GPS industry for in a couple of years, and that all he has to do is get a piece of it now and sit on it.

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Categories: Mergers and Acquisitions · Wireless

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7 Comments So Far

  • Robert says:

    If it’s gonna create jobs and help the economy then we should welcome Carl Icahn;s investments.

  • Grant Lewis says:

    Spot on. Just like icahn quietly purchasing debt of paetec a fews back and sitting on it until they needed to clean up their balance sheets by selling it back having arunis paying a premium he’s doing the same. He’s a creature of habit.

    • Did Mr. Icahn fraudulently purchase debt from Mr. Chesonis? Did Mr. Icahn criminally force Mr. Chesonis to sell him PAETEC’s debt? The answer to both is no…

      There are far too many folks that will consistently persecute those they despise because they have/get more than us/others. That’s fine too, everyone’s entitled to their opinion. Moreover, if you don’t like Mr. Icahn, you don’t have to deal with him – that’s the beauty of this wonderful free market we have.

      However, to smear & pervert what’s taking place as something unlawful is silly & destroys any viable points anyone might have.

      • Let’s also not forget that Mr. Chesonis is gaining ready capital via Mr. Icahn that Mr. Chesonis will investing into his enterprise. Let’s suppose you’re accurate in that Mr. Icahn is looking to make some points on the debt at some point in the future by selling it back to Mr. Chesonis. What’s wrong with that? Moreover, Mr. Chesonis is benefiting as he’s now got liquid capital – which is extremely hard to come by right now – & can expand his enterprise. This will [potentially] gain him additional profits that were not possible WITHOUT the capital Mr. Icahn provided through the debt purchase.

        Mr. Chesonis is an incredibly wealthy individual & he didn’t get there without leveraging debt & ingenuity.

        When we slow down & consider what’s taking place, it’s quite clear that both Mr. Chesonis & Mr. Icahn are both taking risks in effort to increase the value of their respective enterprises. Whether Mr. Icahn or Mr. Chesonis end up one or more points on the other profit/loss-wise is still to be seen, but there is no protagonist nor antagonist no matter how hard folks try to create a climax around it.

        Whether we consider it “vile” or “despicable” or whatever, at the end of the day, they’re both well-accomplished businessmen doing business.

  • Mr. Icahn should be able to do whatever he wants with his money as long as he’s not committing fraud nor force against anyone.

  • Anonymous says:

    @ Justin …. I think you misunderstood Grants post. He wasn’t implying Icahn was doing something illegal. He was implying Icahn is a value buyer taking on debt of distressed assets or devalued. One could argue light squared is closely approaching distressed.

  • mhammett says:

    I think Rob is spot on with the “spectrum is scarce and sooner or later they’re going to have to compromise”. That spectrum will be used for telecommunications at some point, most likely terrestrial. GPS will eventually have to compromise and just build better receivers.

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