MSS Industry Called Ripe for Consolidation
It takes 40 MHz of spectrum to build a sustainable WiMAX business, according to analysts, companies like Clearwire and, most recently, mobile satellite services firms looking at wireless broadband. “To be a real player, you need more spectrum than we have,” Motient & TerreStar CEO Robert Brumley told a UBS conference last week. TerreStar has 20 MHz of S-band spectrum, as does S-band competitor ICO. Separately, neither could make a solid go of WiMAX due to interference risks, Brumley said -- but if the S-band players teamed up, it might be a different story.
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“If 2007 is a consolidation year in the [MSS] space -- which a lot of us hope it is -- there are a number of interesting combinations that could be WiMAX-based,” Brumley told analysts. If MSS firms can figure out how to work through regulatory hurdles and spectrum shortages to collaborate on WiMAX, “it could lead to an interesting year,” he said.
It would make sense for S-band neighbors TerreStar and ICO to work together -- but they probably can’t, Brumley said. When the FCC allocated S-band spectrum to ICO and TerreStar last year, the Commission said it didn’t want to see all 40 MHz in one company’s hands, Brumley said. L-band MSS could be different, however. Brumley hopes “the L-band side of the house” finds a way to concentrate its spectrum for advanced services, or to involve DBS or cable operators in a strategic partnership, he said.
Mobile Satellite Ventures (MSV), Inmarsat, Globalstar and Iridium use L-band frequencies. MSV and Inmarsat operate in the L-band across spectrum that’s highly interleaved and governed by a cumbersome international treaty. “Rebanding” their spectrum would make it more suitable for broadband services, the companies have said. Rumors have swirled for months of spectrum talks involving the MSS rivals. Meantime, MSV and Inmarsat continue to war at the FCC over the L-band’s use.
If L-band operators try to concentrate their spectrum holdings into a 40-50 MHz block, “it will be interesting for us to watch what happens at the FCC,” Brumley said: “If they approve that, then the next logical step would be, in order to compete against it, that we should combine in the S-band.” Speaking not as a Motient executive, “but as an old M&A guy,” Brumley called the MSS industry ripe for consolidation: “In my personal opinion… it’s perfect for it. The technology is there. The spectrum is there. The rights are there. The capital is ready… We're all ready for it. And the FCC will listen to that.”
TerreStar isn’t aiming to be bought, however. “We are not actively pursuing an M&A strategy,” Brumley said. Nor is TerreStar negotiating a spectrum play with DBS or cable firms, he said. TerreStar is busy planning a 4G network that could carry wireless traffic in rural regions where incumbent carriers don’t want to build, he said: “The real interest we see is among parties who either feel disenfranchised, overlooked or less capable of writing large checks to do strategic spectrum deals… RLECs are a good example of that.” A cooperative R&D effort with the Defense Information Systems Agency -- on developing a national emergency response communication network -- is also keeping TerreStar busy, he said.
The MSS company’s staff has ballooned to 87 employees from 2 a year ago. Brumley boasted a rank & file senior management team from across communication sectors -- not just satellite. Expect an ATC application the first of the year, he said.