LightSquared files for bankruptcy protection

US wholesale player LightSquared has filed for Chapter 11 bankruptcy protection amid efforts to resolve regulatory issues that have prevented it from launching its satellite service.

The carrier has been planning to build a ground-based LTE network, supported by satellites, but the US Federal Communications Commission (FCC) blocked the project, stating that the proposed mobile broadband network will impact GPS services and that there is no practical way to mitigate the potential interference.

It has now commenced “voluntarily reorganisation cases under Chapter 11 of the US Bankruptcy Code” and will also file a recognition proceeding in Canada.

“The filing was necessary to preserve the value of our business and to ensure continued operations. The voluntary Chapter 11 filing is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network,” said Marc Montagner, interim co-chief operating officer and chief financial officer of LightSquared.

“All of our efforts are focused on concluding this process in an efficient and successful manner.”

The filing was made in the U.S. Bankruptcy Court for the Southern District of New York and the carrier said it intends to work with all key stakeholders to conduct its restructuring process and exit Chapter 11 as quickly as possible. Its current management team will continue to lead the company throughout this process.

“The company fully expects to continue normal operations throughout this process,” the firm said in a statement. “All LightSquared distribution partners and customers, including public safety, emergency response, government and military users of LightSquared’s satellite-based communications services can continue to rely on LightSquared to provide them with mission critical communications services.”

Dimitris Mavrakis, principal analyst – networks, at Informa Telecoms and Media, believes that future looks bleak for LightSquared.

“LightSquared’s plan was very optimistic from the start. From deployment strategy to business model, LightSquared would be an interesting case study, but very different than anything else in the mobile market today,” he said.

“In my opinion, LightSquared is unlikely to overcome the challenges its facing now, including interference issues and also lack of investor trust especially towards its CEO, Phillip Falcone. It is not entirely clear what will happen with LightSquared spectrum, but if the company folds, it’s very likely that it may be leased to a third party satellite provider.” 

LightSquared had recently defaulted on a payment of $56.25m to British satellite firm, although it eventually made the payment and struck a deal with Inmarsat to suspend further payments until 2014. It also recently announced plans to cut 45 per cent of its staff in order to save money, and even hired well-known solicitor Theodore Olsen in a bid to save the project.