LightSquared to replace CEO as broadband network prospects look dim

The Federal Communications Commission’s decision to revoke permission for LightSquared to build a wireless network continues to reverberate at the Reston-based company, resulting last week in the resignation of its chief executive.

LightSquared has pledged to move forward with plans to build a high-speed network that pairs on-the-ground infrastructure with satellites, but that would require a successful appeal of the FCC’s ruling and the company’s immediate next steps remain unclear.

Doug Smith, chief network officer, and Marc Montagner, chief financial officer, will serve as interim co-chief operating officers as the company searches for a new CEO. The names of potential contenders, including former Nextel Communications chief executive Timothy Donahue, have already emerged in media reports.

The resignation of Sanjiv Ahuja, who will remain LightSquared’s chairman, is the latest troubling omen for the firm. Last month the company said it would lay off about half of its 330-person staff, two-thirds of which are based in the Washington region.

London-based Imarsat also reported on Feb. 20 that LightSquared had defaulted on a $56.25 million payment that was due as part of a spectrum-sharing agreement. LightSquared said in a statement that payment is contingent on “several matters that require resolution,” and declined to elaborate further.

Representatives for both LightSquared and Ahuja declined requests for comment. But in a statement last week, officials said “the company is also taking an aggressive approach to its finances to ensure that it has adequate financial runway while it works through these issues.”

LightSquared was formed in July 2010 by billionaire Philip Falcone’s investment fund, Harbinger Capital, with a commitment of $14 billion. As of last week, Falcone plans to join the firm’s board of directors.

The company has been enmeshed in an ongoing dispute with federal agencies and industry officials about whether its wireless network interferes with the Global Positioning System. Several reports have concluded that to be the case, but LightSquared contends the reports’ criteria are unfair and that any interference is the fault of GPS devices.

LightSquared planned to sell portions of its network to other carriers with a goal of lowering consumer costs and expanding access to high-speed broadband. But industry observers say that business strategy, and the network it requires, is now unlikely.

“The [business] model was always questionable, even without the GPS impairment, but the GPS impairment just sort of accelerated their demise,” said Jonathan Atkin, an analyst at RBC Capital Markets. “It’s not clear to me that the new CEO is going to be able to do anything that the old CEO wasn’t able to do.”

Steven Overly is a national reporter covering federal technology and energy policy with a focus on Capitol Hill. He previously covered the business of technology, biotechnology and venture capital.
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