Truly Ubiquitous Broadband is Getting Closer

Elektrobit is showing off its reference design for a multimode 3G and satellite handset phone at the CTIA Wireless I.T. and Entertainment show this week in San Francisco, and it’s a far cry from the clunky satellite phones of yore. It first unveiled the phone in April, during the larger CTIA Wireless show. At that time Elektrobit said TerreStar, a network that plans to operate a combined terrestrial and satellite network, would use the phone, but since Terrestar was experiencing financial and management problems, few industry watchers got excited.

However in the five months since, TerreStar has signed an agreement with AT&T that allows for seamless hand-offs between AT&T’s 3G network and TerreStar’s satellite network. So a truly worldwide 3G phone (AT&T operates a GSM network) is getting closer, although it still relies on TerreStar launching its satellite next year. The deal with AT&T has me thinking that TerreStar is focusing less on the terrestrial aspects of its planned satellite and terrestrial network, which would lower its costs of building out a network and possibly keep the satellite company in the game.

PE Firm Pushing for Inmarsat/Skyterra Combo

Harbinger Capital today offered satellite service provider MSV/Skyterra $500 million to pay for the company’s launch of its two new satellites. The private equity firm also made clear it’s planning to push for a deal to acquire British satellite company Inmarsat. The acquisition attempt isn’t welcomed by Inmarsat, but Harbinger owns 28.8 percent of its stock, which means Inmarsat will have a tough time keeping Harbinger and the Skyterra deal at bay.

We started to anticipate such mergers back in March after looking at the number of players trying to make it in the difficult satellite services business, as well as the likelihood of U.S. regulators approving the Sirius-XM merger, which took another step further yesterday. Harbinger is apparently confident that the FCC will look favorably on its attempt to provide a 4G satellite and terrestrial network, too.

The combination of Skyterra and Inmarsat makes sense because they both own complimentary spectrum and satellites that work in the L band. According to the Skyterra press release, regulatory approvals for any deal would take between a year to 18 months to complete, which means the $500 million in cash is needed to keep the company — and its birds — afloat in the meantime.

Harbinger could be eyeing other deals as well. The firm has a large ownership stake in TerreStar, which owns spectrum in the same band owned by EchoStar. TerreStar is leasing spectrum from Echostar are already sharing spectrum, so closer ties between those two are likely coming.

photo from NASA

Is 4G Via Satellite Destined to Fail?

Last Friday, four executives of satellite holding company TerreStar Networks suddenly resigned, leaving just three people behind to fill the void. I don’t expect this lack of management to last for too long, but until TerreStar calls me back with details, I’m betting that the change in management signals a change in TerreStar’s strategy in that it’s no longer looking for a larger partner to help it build and finance a combined 4G satellite and terrestrial network, but is preparing to move ahead alone.

TerreStar is the new name of a former pager company called Motient. In 2004 Motient scored the regulatory jackpot when, despite protests from the cellular carriers, the Federal Communications Commission approved plans for an ancillary terrestrial component (ATC) network. Since then, it has found itself tangled up in a web of financial transactions designed to maximize the value of its two bands of satellite spectrum.

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Satellite Mergers Ahead?

Monday’s decision by the Justice Department to allow XM and Sirius to merge, combined with incumbents such as Verizon and AT&T winning much of the spectrum on offer in the 700 MHz auction, means we’re likely see M&A among the major satellite players in the coming year.

Had a new entrant won a lot of spectrum in the auction, they could have partnered with one of the satellite operators and potentially reduced some of the costs of building out a terrestrial network as well as gotten some extra spectrum. In the last few years, there has been a plenty of speculation over spectrum among MSS players, with operators including Iridium, Globalstar, ICO Global Communications, TerreStar Corp. and Mobile Satellite Venture are all trying to operate or build out networks.

Instead of launching a satellite only-business, these companies hope to take advantage of a combined terrestrial and satellite network to offer wireless services, most likely to carriers or to governments. But a shortages of spectrum for some players, plus a Justice Department willing to let satellite deals through, means many of them may team up rather than go it alone.

Tim Farrar of research firm TMF Associates says that, given the spectrum owned and the types of satellites launched, the likeliest deals would be between Inmarsat and MSV; ICO and TerreStar; and Globalstar and Iridium. 2008 will be the year to watch this sector.