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MSV, Inmarsat Spectrum Deal Clears Way For ATC Networks

By | January 9, 2008

      [Satellite News – 1-9-08] SkyTerra Communications Inc., Inmarsat plc, Mobile Satellite Ventures (MSV) and MSV Canada Inc. have reached an agreement to re-band and efficiently use their L-Band spectrum across North America.
          The agreement, signed Dec. 21, allows the companies to group formerly unconnected bits of bandwidth into one, continuous block of spectrum, said John Mattingly, president of satellite services at MSV.
          “A block of spectrum gives us enough capacity to do a network,” he said. “We have been in negotiations with Inmarsat to make some sort of deal happen. We operate our satellites, they offer services over North America through theirs, and some of our services interfere with theirs. This harmonizes the L-band use between MSV and Inmarsat.”
          MSV marketing communications director Tom Surface said that this agreement is exactly what the company needed in order to move forward on their next-generation network using Ancillary Terrestrial Components (ATC). The use of ATC can enhance availability, efficiency and economic viability of Mobile Satellite Services (MSS) by reusing at least some of the frequency bands that are allocated to cellular systems. Without ATC, it may be challenging for MSS operators to reliably serve densely populated areas because the satellite’s signal may be blocked by urban structures. As a result, mobile satellite business executives are pursuing solutions using ATC retransmissions, which can reduce or eliminate this problem, paving the way for a strong business for next-generation mobile communications.
          The agreement was defined in two phases. Phase one, from December 2007 to September 2011, gives the companies an 18 to 30 month period to transition to the modified band plan, including “modification of certain of Inmarsat’s network and end user devices and a shift in frequencies between the MSV parties and Inmarsat,” according to the U.S. Securities and Exchange Commission report. MSV will be allocated 28 MHz of L-band spectrum, and will pay Inmarsat $250 million in cash and $87.5 million in equity for additional spectrum.
          During phase two, from January 2010 to January 2013, Inmarsat will be able to modify the amount of spectrum it uses over North America and make that bandwidth available to MSV for rental use. MSV will pay $115 million for this additional spectrum.
          “Over time we’ll have two blocks of 23 MHz each,” Mattingly said, “as well as large blocks of contiguous channels.”
          In addition to the re-banding, Inmarsat Vice President of External Affairs Chris McLaughlin said the agreement resolved some spectrum issues between the two companies, fulfilling requirements set by the U.S. Federal Communications Commission.
          “There was some debate on whether we had been loaned some spectrum by MSV or if it was spectrum which had been given over to Inmarsat,” McLaughlin said. “There was a lot of debate that’s now been resolved. It’s good to have been able to do what the U.S. regulators asked us to do.”
          Tim Farrar, president of satellite consulting firm TMF Associates, said this agreement shows that Inmarsat is definitely interested in working with ATC.
          “I think there has been some doubt about whether [Inmarsat] really wants ATC to be a success, or whether in some ways it feels like it might be the last company standing if it doesn’t work out and other competitors won’t be able to fund their systems,” he said. “[This deal] demonstrates that it’s possible to put together a significant block of spectrum when you combine holdings, which might be attractive to partners.”
          “We’ve said that we would be interested in being a partner for ATC, but that would require other partners,” said McLaughlin. “Inmarsat isn’t a Sprint or AT&T, we don’t have the massive resources to bring a consumer product to American consumers. We would be part of a consortium, but it remains to be seen how and when that would be built.”
          For MSV, this agreement clears the path for the development of its second-generation satellites. The company is developing two satellites, which will be built by Boeing Co. and will provide wireless broadband coverage of North and Central America. The first satellite is scheduled to be launched in the second half of 2009. On Jan. 7 MSV closed an agreement with SkyTerra to sell $150 million worth of notes and warrants to Harbinger Capital Partners Master Fund 1 Ltd. and Harbinger Capital Partners Special Situations Fund LP that Mattingly said will cover the company through the end of 2008.
          “This [agreement] gives us the pathway to where we want to be to execute our business plan,” Mattingly said. “It’s full speed ahead.”

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