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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
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AT&T’s 700 MHz Strategy: LTE
The open access restrictions mandated by the Federal Communications Commission on portions of the recently auctioned 700 MHz spectrum were among the main reasons AT&T chose not to bid for that spectrum but opted instead to pay more for that of the B-Block, which complements the slice they bought from Aloha Partners, according to AT&T Wireless President and CEO Ralph de la Vega.
Verizon Wireless paid $4.74 billion for a majority of the C block spectrum, while AT&T picked up 227 licenses in the B block of regional licenses. Verizon forked out $9.63 billion on spectrum licenses, and AT&T ponied up $6.64 billion. Some on Wall Street have criticized AT&T for paying too much for the Aloha Partners slice of the 700 MHz spectrum, but it seems like AT&T thinks paying a premium so it doesn’t have to share the network with others was worth it. “Our strategy was to acquire the spectrum that complemented our spectrum we acquired from Aloha,” de la Vega said on a conference all with reporters.
He pointed out that the company has enough wireless spectrum to cover 87 percent of the total U.S. population and 100 percent of the nation’s top 200 cities. Also during the call, AT&T officials said the 4G LTE wireless broadband networks based on the 700 MHz spectrum will roll out in 2012. De la Vega said the company has a road map to push the 3G speeds quite high — up to 14.4 megabits per second. (I am checking on this bit as my notes got a little smudged, the risk you run when writing with an old-fashioned ink pen.)
(I will update with details from interviews with AT&T executives.)
When I asked de la Vega whether AT&T would work with anyone outside of their traditional vendors, he said the company wants to explore all options and would be open to working with new suppliers, especially if they have interesting technologies and price points. In other words, don’t be surprised to see some Asian vendors bidding for the 700 MHz business.
AT&T Buys 700 MHz Spectrum Licenses
As Google (GOOG) and Verizon (VZ) duke it out over the forthcoming 700 MHz spectrum auction, AT&T (T) has decided to spend the money and buy its way into the market. The company has announced that it is acquiring licenses in the 700 MHz spectrum from Aloha Partners, a privately-held spectrum speculator, for about $2.5 billion.
The licenses cover roughly 196 million POPs in 281 markets, including 72 of the top 100 and all the top 10 markets in the U.S., according to the AT&T press release. UBS analysts estimate that this works out to about $1.06/MHz/POP, which is twice the price paid last year as part of the AWS auctions.
The upcoming auction in the A and B spectrum blocks has reserved prices of $0.50/MHz/POP and $0.38/MHz/POP. UBS expects that will rise to at least $1/MHz/POP. AT&T just set that price.
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Holy Yipes, it’s back!
Back in 2000, Metro Ethernet start-ups were telecom version of bling: shiny new things that raised hundreds of millions of dollars from brand name venture capitalists; had cool names such as Telseon, Broadband Office and Sigma Networks. And when the telequake hit, they all fell like straw huts built on landfill. One such company was Yipes Communications.
It went bankrupt, reorganized and raised even more money and started preaching the Gigabit Ethernet Mantra. That was back in 2003, and we soon lost interest. Up until last week when we caught up with John Scanlon, who is now the chief executive officer of the San Francisco-based company that now calls itself Yipes Enterprise Services.
The company (in the new incarnation) has raised a whopping $100 million from the likes of Norwest Venture Partners and Crosslink Capital, and has been on an upswing, with revenues growing at more than 40% per annum. What happened?
A few things: for instance, instead of focusing on wholesale and other market segments, Yipes adopted a smart (and simpler) strategy, with a focus on customers whose fortunes didn’t rise and fall like hemlines in Paris: banks, law firms, retail chains and large corporations. Yipes has 850 corporate customers, and is signing up more at a furious pace. It helps that it owns 14,000 fiber miles and points of presence in most major metros in US and around the globe. (Hey, all the bubble-era excesses had to come in handy sometime or the other.)
Over past couple of years, large corporations have seen their data needs go up exponentially. File transfers, data back-ups, VPNs - all need more bandwidth that what the traditional means can provide. The long-in-the-tooth T-1 doesn’t cut it anymore. Instead an increasing number of corporations are opting for Ethernet-based services.
Yipes is happy to sell exactly that: multi-megabit Ethernet services that were more than a standard 1.54 megabit/second T-1 connection and the expensive DS-3 connections.
“Bonding T-1 doesn’t do the trick and DS-3 is too much,” says Scanlon, and points out that a typical customer of theirs wants between 3 and 100 megabits per second, with the option to upgrade. Listening to the market has paid off for Scanlon, who is credited it for the Yipes resurgence. Revenues in 2006 jumped 41%, somewhere in the $40-$45 million range. Scanlon told us that in 2007, sales could be as high as $70 million. The company went cash-flow positive in the fourth quarter of 2006.
The success is not going unnoticed, and rivals like Level 3 and the Bell companies are getting serious about the Ethernet services business. To that Scanlon says, bring it on. “I battled AT&T when I was at MCI, so this is not new,” he jokes. “Level 3 is a wholesale carrier, and you know the enterprise customer is a lot different than a wholesale customer.”
He thinks that Yipes’ focused sales and support structure gives it a leg-up on rivals. “We are a focused service unlike others. There is a comfort in focus,” says Scanlon. Of course, there is comfort in the fact that you can’t do worse that your past!
For further reading, Will Reed Hundt 2.o have better luck?