A partner at ACM Partners defends Phil Falcone - sort of
Mr. Johnson doesn't mince words about how LightSquared is trying to avoid spectrum auction fees by re-purposing the SkyTerra ATC authorization, which is from the same play-book that Craig McCaw followed when planning Nextel's "push-to-talk" network. It's refreshing to see an opinion that gets to the heart of the matter: the immense profit that Harbinger Capital will enjoy if its lobbying efforts bear fruit, and Mr. Johnson compliments Mr. Falcone for having powerful enemies.
What Mr. Johnson /doesn't/ point out is that AT&T and Verizon, used to multi-million dollar budgets and to having the FCC do whatever they ask, are both miffed that LightSquared might repeat McCaw's success and join the major leagues without having done time playing triple-A ball. I doubt that either firm is concerned about the competition, but I'd bet that they are /very/ worried that Mr. Falcone will pull off an inside-the-park home run, and, in the process, cause Verizon's and AT&T's investors to wonder if their management teams are playing out of their league.
(From the Business Insider blog) by David Johnson
Many successful investors have proclaimed the wisdom of betting on the jockey rather than the horse when making their investment decisions. This is entirely sensible, as outstanding management has certainly proven its value time and again for start-ups, multi-nationals, private equity firms and hedge funds. But (to strain this metaphor somewhat) occasionally the jockey opts for a different race, track, etc. For private equity firms and hedge funds this is style drift; and it represents the point at which betting on the jockey gets complicated.
The case of Phil Falcone, founder and Chief Investment Officer of Harbinger Capital Partners and LightSquared, his bet-the-firm investment, illustrates the ragged edge of the conundrum that "bet on the jockey" types can face when the jockey wakes up one day and decides to use the same horse to play a different game.
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Through a series of debt and equity investments in satellite companies Inmarsat and SkyTerra Falcone assembled, for approximately $2 billion, a 56 megahertz block of radio spectrum. LightSquared is the company Falcone has created to build a cellular network from this valuable spectrum. This is basically an attempt to repeat Craig McCaw's success with Nextel, whose network was assembled cheaply by buying up taxi dispatch licenses (any good restructuring/distressed professional is a font of wisdom on business plans and it is surely no accident that LightSquared represents an attempt to replicate such a successful strategy).
Unfortunately for Falcone, the block of spectrum LightSquared owns is adjacent to the frequency used for GPS signals, and he has stepped into a hornet's nest of regulatory intrigue. Given that his opponents include Senator Charles Grassley of Iowa, John Deere (yes, the tractor company), the Pentagon, Verizon and AT&T (whose lobbying prowess, despite the T-Mobile debacle, has long been considered formidable), Falcone might reasonably consider that he is on to something.