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TerreStar Receives $300 Million In Investment Funds

By | February 13, 2008

      [Satellite News – 2-13-08] Echostar Corp., Harbinger Capital Partners Master Fund 1 Ltd. and Harbinger Capital Partners Special Situations Fund LP (collectively, Harbinger) and other investors have agreed to invest $300 million into TerreStar Corp., TerreStar announced Feb. 7.
          $200 million will be made available at closing and the balance will be dedicated to funding the TerreStar-2 satellite. TerreStar-1, North America’s first fourth-generation integrated mobile satellite and terrestrial communications network, will provide universal access and tailored applications over conventional wireless devices throughout North America. The satellite, which was originally scheduled to be launched in November 2007, has been delayed a second time due to issues concerning the feed array, which could delay the delivery and launch of the satellite by three months. Space Systems Loral stated that it will provide a more definitive schedule after additional testing is completed in April. Arianespace, the launch provider for TerreStar-1, has confirmed that it can launch the satellite during the December 2008 – February 2009 launch window under the “launch on demand” contract between TerreStar and Arianespace.
          As part of these transactions, TerreStar will also obtain an enhanced nationwide spectrum footprint through separate rights to certain 1.4 gigahertz (Ghz) spectrum currently held by EchoStar and Harbinger.
          “The enhanced nationwide spectrum footprint can help TerreStar accomplish its mission to offer reliable, interoperable satellite-terrestrial communications and next-generation applications for the commercial, government, rural and public safety sectors throughout North America,” said Robert H. Brumley, TerreStar CEO and president in a statement.
          As part of the agreement, EchoStar will provide an exclusive right to use EchoStar’s current 1.4 GHz spectrum, with an option to purchase the spectrum in exchange for the issuance of 30 million shares of TerreStar Corp.’s Common Stock. TerreStar will also acquire 1.4 GHz spectrum licenses from Harbinger in exchange for 1.2 million shares of non-voting junior participating preferred stock following shareholder approval.
          Brumley said the addition of the 1.4 GHz spectrum will allow TerreStar to improve the quality of service on the edge of their network.
          “The thing that satellite and terrestrial towers have in common is in in-building penetration,” Brumley said. “We can use that 1.4 quality of service enhancement in locations that would be on the edge of our network. By doing that the quality of your signal would be equal to or greater than what you’re experiencing outside. This allows us to use the spectrum efficiently.”
          Industry analyst and consultant Roger Rusch, president of Telastra Inc. said there’s a lot of confusion surrounding the deal.
          “I’m a little bewildered,” he said. “Everybody’s trying to figure out if there’s something going on here.”
          Since Echostar had no comment about the investment, analysts have been forced to speculate about the company’s reasons behind the deal.
          “When you try to sort all this out — the question is why is Echostar doing it, and does it have something to do with the other interests of EchoStar,” Rusch said. “Is the decision to pour money into Terrestar related to EchoStar desperately needing to get [the CMBStar] satellite launched to provide service for the Olympics?”
          Rusch also pointed out that TerreStar investor Harbinger has also invested in TerreStar competitors Mobile Satellite Ventures and Inmarsat PLC, and wondered if the company intends to gain ownership in the MSS market and then consolidate the companies.
          “It doesn’t sound simple and straightforward,” Rusch said. “It isn’t clear why EchoStar and these other people would be pouring money into TerreStar when the same companies are also investing in Inmarsat and MSV, which are competitors to this system. Why are they putting all this money into the space segment when what’s needed is to put money in ground – there’s a lot of questions.”

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