BusinessWeek – Philip Falcone’s Harbinger Capital Partners has placed a large and risky bet on 4G wireless Internet service by paying an estimated $500 million for SkyTerra Communications. The hedge fund’s filings with the Federal Communications Commission lay out a plan to build 36,000 radio towers and send up two satellites. The spectrum Harbinger picked up in the deal could be worth up to $7 billion, based on a Credit Suisse analysis of the value of wireless licenses. Harbinger spokesman Joshua Lefkowitz declined to comment for this story.
Falcone generated billions shorting subprime mortgages and going long on steel. Like most hedge funds, though, Harbinger lacks a track record running companies, and the deal is a gamble whether the firm pursues a national rollout or sells the spectrum to another company. To get FCC approval for the SkyTerra deal, Falcone committed to building a wireless network that can serve 100 million Americans by the end of 2012. By 2016 the network must cover 260 million people. If Harbinger misses these targets, the FCC can declare its rights to use SkyTerra’s spectrum “null and void,” according to a March FCC filing.
