Inmarsat Goes after LightSquared for Missed Payment

Problems for telecom company LightSquared continue to arise.

The closely held Reston, Va.-based company, whose plan to build a wireless network in the U.S., was blocked last week by federal regulators, failed to pay telecommunications firm Inmarsat $56.3 million under a spectrum-cooperation accord, Bloomberg reported Monday. Inmarsat was providing wireless spectrum for the wireless network LightSquared wants to build out in the U.S.

Inmarsat could not immediately be reached for comment. But London-based Inmarsat said in a statement to Bloomberg that it issued a default notice under the company agreement, which means LightSquared will have 60 days to make the payment. Meanwhile, LightSquared said in a statement Inmarsat needed to uphold certain obligations as part of the network deployment and that several matters must be resolved before the payment is made.

LightSquared is committed to fulfilling its business plan to bring world-class wireless broadband connectivity to millions of Americans and believes that Inmarsat will remain an important partner in the company's future endeavors, LightSquared said in its statement.

The dispute underscores the financial challenges for LightSquared since the decision to build a wireless network was blocked last Tuesday by the Federal Communications Commission. The company had invested $4 billion in airwaves to offer Internet service at higher speeds to as many as 260 million customers. The program's total cost is estimated at about $14 billion.

But regulators found that the network interfered with the navigation systems of planes and boats, known as Global Position System (GPS). LightSquared plans to continue fighting for the network despite the FCC ruling.

There is no legal question that an America where both the GPS industry and LightSquared's network can co-exist is a stronger one for any administration that believes in competitive markets and job growth, LightSquared said in a statement following the FCC decision.

The firm has threatened a legal challenge, but analysts believe that will be an uphill battle.

Given the unanimous view (of regulators), I think that would be a very difficult challenge, Gimme Credit analyst Dave Novosel said in an interview following the FCC decision. The odds of success there are not good.

This article has been updated to include a statement from LightSquared.