Really Rocket Science

FightSquared is about to be resolved.

After “lawyering up” for the last few years, here comes the judge. She suggested everybody coffee-up for Thursday’s hearing.

Don’t call him “Nixon,” as Charlie seldom ever loses a hand in this game.

Here’s the latest tit-for-tat, via The Deal Pipeline…

“Mr. Ergen’s testimony cannot be believed,” said debtor counsel Andrew Leblanc of Milbank, Tweed, Hadley & McCloy LLP.

Dish Network Corp. chairman Ergen, who holds more than $1 billion in secured claims including interest, is the sole objector to the reorganization of Philip Falcone-backed LightSquared.

Leblanc told the court that Ergen impeached himself 27 times during testimony earlier in 2014 by disagreeing with his deposition before the trial.

LightSquared and supporting creditors are trying to convince Judge Shelley Chapman of the U.S. Bankruptcy Court for the Southern District in New York that the debtor should be able to give Ergen different compensation for his secured claims than other creditors holding secured debt. The plan supporters also want Chapman to designate, or disqualify, Ergen’s vote.

The debtor plans to repay Ergen’s first-lien debt with a third-lien note that would not pay cash for seven years, unless it were refinanced. Other secured creditors would receive cash payments in full shortly after confirmation of the plan.

Ergen’s counsel, Rachel Strickland of Willkie Farr & Gallagher LLP, called the plan “totally unjust and in violation of the [Bankruptcy] Code,” in court Monday.

LightSquared sought Chapter 11 protection two years ago. The debtor was unable to fund its business when the Federal Communications Commission withdrew support for a proposal that would allow LightSquared to use is spectrum — which is licensed for hybrid satellite-terrestrial service — for wholesale wireless broadband service.

The confirmation hearing has focused as much on Ergen’s alleged misdeeds as it has on the plan supported by Fortress Investment Group, Melody Capital Advisors LLC, Philip Falcone’s Harbinger Capital Partners LLC and JPMorgan Chase & Co.

LightSquared argues that the plan, which incorporates $2.65 billion in new financing, compensates all creditors fully and fairly.

Ergen’s lawyers told Chapman that the debtors are buying the votes of junior classes by giving them better treatment than the Dish chairman. “They are patting themselves on the back for get a fully consensual plan?” Strickland asked the court. “They are trying to work around the [Bankruptcy] Code.”

Strickland called the effort to divide the secured debt into two classes a “completely unprecedented maneuver.”

LightSquared and creditors argue that Ergen violated a credit agreement by purchasing the claims, because terms of the loan blocked competitors such as Dish from purchasing the debt.

The debtor also accuses Ergen of disrupting its reorganization, and notes that another judge in the Southern District of New York designated Dish’s vote in the reorganization of DBSD North America Inc. Dish wound up buying the satellite communications company.

Dish offered $2.22 billion to purchase LightSquared’s most attractive portfolio of wireless licenses last year. LightSquared said the offer undervalued the debtor, though a group of secured creditors proposed a reorganization of a unit of the company built around Ergen’s offer.

Dish withdrew the bid in January, after termination dates for the deal passed. Chapman ruled that the company had the legal right to terminate.

LightSquared has negligible operations. The value of the debtor’s estates lies in its spectrum, and will swing widely depending on the FCC’s ruling on licensing.

Leblanc told Chapman that Ergen plays “the long game,” and would attempt to buy the company on the cheap if he could disrupt the reorganization plan. The lawyer noted that Dish’s purchase of DBSD played out over a long period, and predicted that the satellite TV company still has an interest in LightSquared and its wireless spectrum.

Know when to hold em, know when to fold em.

In spacecraft operations, the last thing you want is a ground controller who decides following the standard operating procedure is for idiots. Not sure if that’s what happened at the Ciel-2 TT&C facility, but something bad did, causing the spacecraft to go into safe mode.

The customer, DISH Network, leases capacity from SES, who leases from Ciel Satellite Group, owners of the spacecraft, acknowledged the anomaly…

DISH Network restored all affected television channels for its customers Wednesday morning after experiencing a temporary interruption of service on some of its channels overnight.

The interruption mainly affected high definition channels to a portion of DISH Network customers. Standard definition channels were largely unaffected resulting in a majority of DISH Network customers not being affected at all.

The interruption began at approximately 5 p.m. ET Tuesday and involved the Ciel2 satellite, which is operated by SES at 129 degrees West Longitude through a Canadian subcontractor and leased to DISH Network. SES has attributed the anomaly to human error in its ground operation of the spacecraft. According to SES, there is no issue with the health of the satellite.

I’m glad I’m in the eastern arc and unaffected by this outage. I feel sorry for the folks in Saskatoon — those who committed the “human error” in question. The spacecraft lost its orientation and therefore automatically went into safe mode, a near total shutdown. Afterwards, it take a few hours to turn on the tubes.

After the bloodbath at SES this spring, followed by a new management scheme announced at the beginning of May, it was inevitable they’d lose some of their star performers. Anders Johnson was one of them and he just joined EchoStar Satellite Services…

EchoStar Corporation (NASDAQ: SATS), the premier global provider of satellite operations and digital TV solutions, announced today that Anders Johnson has joined EchoStar as President of EchoStar Satellite Services, reporting directly to Michael Dugan, Chief Executive Officer and President of EchoStar.

“Anders brings us a wealth of experience in global satellite spectrum development, international markets, satellite financing and investment, which will help us in continuing to develop our satellite services business as well as working with myself and Hughes management to develop and implement our international expansion strategy,” said Mr. Dugan.

Mr. Johnson was most recently at SES World Skies where he served as Senior Vice-President, Strategic Satellite Development since 2005. Prior to SES, Anders worked at GE from 1985 in a variety of executive level roles including Satellite Services, Aviation Services and Transportation & Industrial Financing.

He also graduated from New York Tech and worked for Manny Hanny.

There are a lot of very smart people in the satcom business. Rocket scientists, engineers and business-heads find ways to make money. Good money. We’re talking 80% EBITDAs. You don’t have margins like that without knowing what you’re doing.

You’ve got to plan ahead years in advance, making sure your space assets are fully utilized. The radio spectrum you own is the most prized “asset” you’ve got. You can always build more spacecraft, but you can’t make more spectrum. Unless you find ways to either make better use of what you got or go out and get spectrum that’s not being used effectively.

Great. Now go out and sell it, baby!

Pricing is the real challenge. New satcom services priced to assure an 80% EBITDA are destined to fail, as they’re based on costs incurred many years before service launch. And what do we know of today’s data communications pricing schemes? They move fast. Very fast. Extremely competitive, too, so prices move lower and lower. Iridium? Financial disaster: pricing was based on mobile costs-per-minute in the 1990’s. When they launched, people were paying a fraction of that. As Iridium was about to go belly-up, the U.S. DoD steps in and says “we’ll carry you after bankruptcy.” Why? Iridium covered the globe with a diverse path for communications, and that’s very valuable. But not at that old price.

Diversity is for when other communications fail or are unavailable. We always thought a combination iPhone that uses the S-band for connectivity when regular signal or WiFi are not available would be oh so cool. So maybe now our vision might be realized.

With Dish Network as the “stalking horse bidder” in the TerreStar Networks bankruptcy auction, they see something not readily apparent to others. It’s the spectrum, stupid. Yes, TerreStar has S-band spectrum for CONUS service, but they also have authority for a combined satellite and ancillary terrestrial component (ATC) service. The FCC granted authority in January, 2010. This is really good and it comes without the GPS interference crap that LightSquared has to contend with.

Good move. Dish has a chance to sell mobile data plans with their current TV service packages — or perhaps future packages for on-demand (Blockbuster) or à la carte services to appeal to the growing number of cord-cutters.

Two scenarios emerge: (1) Dish Network adds reasonably-priced mobile data plans to satellite TV services, and (2) an alternate mobile telecom infrastructure emerges to augment today’s overloaded terrestrial networks.

Dean Olmstead was a fan of TerreStar, so he probably had much to do with laying plans to make this kind of move before he passed on.

A couple of years ago, the Americom name went away. That’s when owner SES S.A., having bought out GE’s stake via a creative asset & cash transaction, decided to combine Americom’s Princeton-based operation with the New Skies organization in Den Haag. All got mashed up into a thing called SES WorldSkies.  A dozen employees were let go, including yours truly. All of them in the U.S.

Recently, just prior to the Satellite 2011 show in Washington, a call went out from Betzder Schlass, headquarters for SES S.A., that the companies are slated for a re-org and “right sizing.” Yeah, heads were going to roll. Officially, it was not about “headcount,” only a justification of expenses. The networking among long-time U.S. employees immediately preceding this news was darkly startling: never have I seen more activity from former Americom colleagues on LinkedIn.com.

Ironically, the corporate rattling started just as the Society of Satellite Professionals International announced their 12th induction into the SSPI Hall of Fame. Three of the seven inductees were past CEOs of SES Americom: Dean Olmstead, Ed Horowitz and Rob Bednarek.

To many “old pros,” this wasn’t really news. They’ve seen the writing on the wall and concluded there would be less and less people running the business in the U.S., with the possibility of shutting down the Princeton office once the lease expired in 2014.  Earlier this month, a couple of dozen people lost their jobs, the lion’s share in New Jersey. Some were happy to “get a package” and move on, others not so much.

The office in Den Haag will likely be shut down, with most of the jobs moving to Luxembourg. Princeton jobs will likely be moved to Washington. Remaining will be token offices to satisfy licensing requirements.

What does this say about the state of the satellite business in the U.S.? Are EchoStar and DirecTV the only true American commercial satellite operators? Both SES and Intelsat are based in Luxembourg, Telesat’s based in Ottawa, Canada, and Eutelsat’s in Paris. And they’ve all benefited from the U.S. government’s need for satellite bandwidth in the Middle East and Central Asia (Iraq & Afghanistan). How much of the profits from U.S. sources, commercial and government, are used toward economic benefit in the U.S.? Perhaps a few satellite builds with Space Systems/Loral and Orbital Sciences.

Makes for an interesting argument. Bring it.