LightSquared CEO Ahuja Steps Down; Falcone Joins Board

Tuesday, 28 Feb 2012 05:55 PM

 

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LightSquared Inc. said Tuesday Chief Executive Officer Sanjiv Ahuja resigned after regulators this month blocked its proposed wireless venture, saying it would cause interference with navigational equipment.

Ahuja, who has been LightSquared’s only chief executive officer, will be replaced temporarily by co-chief operating officers Doug Smith and Marc Montagner, the company said in a statement. Ahuja will remain chairman and Philip Falcone, the billionaire backing the venture, will join the company’s board.

LightSquared, which is trying to compete with AT&T Inc. and Verizon Wireless, was blocked by the Federal Communications Commission this month over concerns about potential disruptions to global-positioning systems. The agency is taking comments on its proposal to rescind permits.

“Ahuja lost his credibility by continually stating his absolute confidence that this will get resolved,” said Tim Farrar, an analyst at research firm TMF Associates Inc. in Menlo Park, California. “As this moves forward, the focus will be more toward litigation and away from building a network,” said Farrar.

Falcone’s Harbinger Capital Partners hedge fund has invested about $3 billion in closely held LightSquared. Last week, after skipping a $56.3 million payment to its partner Inmarsat Plc, a British satellite operator, the company said it was cutting 45 percent of its 330-person workforce.

Shrinking Effect

“Sanjiv has shown great leadership in bringing the LightSquared vision to this point, including leveraging his experience in the telecom industry to sign dozens of critical partnerships across the country,” Falcone said in the statement. The Reston, Virginia-based company is “committed to working with the appropriate entities to find a solution to the recent regulatory issues.”

LightSquared said it expects to name Ahuja’s replacement in the near future.

As of the end of January, Falcone carried his investment in LightSquared’s equity at $1.5 billion, or about half of what his hedge fund had invested to date, according to a Harbinger document. Falcone has hired Moelis & Co. and other advisers to help study alternatives for the company.

Wholesale Model

LightSquared has planned to offer wholesale service to partners so retailers, consumer electronics companies and wireless operators could use its network to offer their own services. It announced agreements with companies including Sprint Nextel Corp. and Best Buy Co.

Another partner, FreedomPop, a startup backed by Skype Technologies SA co-founder Niklas Zennstrom, ended its agreement with LightSquared and signed a wholesale agreement with Clearwire Corp., on Feb. 15.

Ahuja said LightSquared could bring lower costs and more innovation to the U.S. wireless industry. Last year, he said the service would allow retail partners to cut in half their customers’ mobile-data costs.

The FCC said this month that it wouldn’t allow LightSquared to proceed with its network after federal agencies determined its signals interfere with global-positioning system devices.

“There are no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment,” Lawrence Strickling, administrator of the National Telecommunications and Information Administration, said in a letter to the FCC.

New Inquiry

Separately, Republican leaders of the House Energy and Commerce Committee that oversees communications policy today asked the FCC and other regulators for details of their handling of LightSquared’s application.

FCC Chairman Julius Genachowski was asked to produce records of contacts with Harbinger, LightSquared, navigation- gear makers and with other U.S. officials, including White House workers, according to a letter the committee released by e-mail. The request was signed by members led by Representative Fred Upton, the Michigan Republican who is chairman of the committee.

Tammy Sun, a spokeswoman for the FCC, in an e-mail said the agency will cooperate with the committee.

© Copyright 2014 Bloomberg News. All rights reserved.

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