MSV, TerreStar Ownership Dispute at FCC
A lengthy shareholder dispute involving Mobile Satellite Ventures (MSV) and sister satellite firm TerreStar has landed in the FCC’s lap. In a proposed ownership shuffle that would separate the satellite firms, controlling companies Motient and SkyTerra recently sought transfer of MSV’s FCC licenses from Motient to SkyTerra. The transaction’s docket saw only one set of comments, from Highland Capital, run by Motient shareholder and former Motient director James Dondero, long a critic of Motient’s management.
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Both MSV and TerreStar have significant 4G spectrum rights in U.S. and Canada, in the L-band and the 2 GHz S- band, respectively. That’s why Motient and SkyTerra want to separate and consolidate the satellite firms’ ownership, they say. Simplifying MSV and TerreStar’s structures will put the companies in better positions to create nationwide hybrid satellite/terrestrial wireless networks, Motient and SkyTerra contend. Perhaps most importantly, the firms claim the move will help MSV and TerreStar attract capital and make strategic partnerships.
The FCC wants MSV and TerreStar to have distinct majority owners, some satellite industry officials and analysts said. SkyTerra owns 16% of MSV and 13% of TerreStar. Motient holds 43% of MSV and 54% of TerreStar. If the transaction at issue is approved, SkyTerra will hold 70% of MSV and its FCC licenses; Motient will hold 74% of TerreStar. Motient will keep a small nonvoting stake in MSV; SkyTerra, 12% of TerreStar.
But Highland raised a number of red flags in comments to the FCC. The transaction isn’t in the public interest because it could hurt TerreStar, according to the Motient shareholder, which wants the FCC to evaluate the deal’s impact on both MSV and TerreStar. Highland questioned the utility of disturbing the firms’ existing ownership structure, demanding more facts, including details of intellectual property agreements between MSV and TerreStar and TerreStar’s financials.
“Any consideration of asserted public interest benefits to MSV’s L-band network that might flow from the proposed transaction must be weighed against any potential public interest harms to TMI/TerreStar’s plans to build its S-band network,” Highland said: “The Commission should determine whether the proposed restructuring… would indeed increase competition for wireless broadband services… or whether it will cause significant delay or disruption in the build out of one or both of the proposed networks.”
Motient, SkyTerra and TerreStar disagree with Highland and have met with staff in all 5 commissioners’ offices and the International Bureau to say so. Motient asked the FCC to ignore Highland’s comments because they were filed a day after the deadline. Either way, Highland provided no information relevant to Commission deliberations, Motient said: “Even the non-germane information that Highland provided in its comments is substantially inaccurate and harmful as to both Motient and TerreStar.”
Motient also said Highland principal Dondero in July acquired an 8.75% ownership interest in ICO -- a direct competitor of MSV and TerreStar and the only other 2 GHz MSS licensee. Dondero’s purchase “makes particularly disingenuous Highland’s expressed concern for TerreStar’s future… and it may well give Highland an interest in complicating the business plans of MSV and TerreStar,” Motient said.
Meantime, Highland filed in Travis County, Tex., court for an injunction to rescind the Motient-SkyTerra agreement. Depositions are set for Aug. 23-29, Highland said, and the FCC shouldn’t act until pretrial evidence discovery in the suit, which may reveal pertinent information, it said.
The claims are private and no concern of the FCC’s, Motient said. Highland’s claims in the Tex. court are under federal securities laws, seeking a declaratory ruling under state contract laws, Motient said: “The Commission will evaluate in this proceeding whether the proposed transfer of control of MSV is in the public interest, not whether the agreement between Motient and SkyTerra satisfies securities law requirements or whether the agreement is enforceable.”