Harbinger feels new losses due to LightSquared

BOSTON, March 26 (Reuters) - Hedge fund manager Philip Falcone's clients got another dose of bad news when the billionaire investor said his flagship fund lost 29.6 percent in February largely because of ailing telecommunications company LightSquared Inc.

For the first two months of 2012, the Harbinger Capital Partners Fund II fell 26.7 percent, said two sources who are familiar with the numbers but cannot discuss them publicly.

The heavy losses in the portfolio coincided with news that the U.S. government planned to revoke its provisional approval to LightSquared to build out its network after tests showed that the network would interfere with the global positioning systems used by the military and commercial airliners among others.

Falcone, who cemented his reputation with a savvy bet against the subprime mortgage market, has recently wagered his career and portfolio largely on bringing wireless service to rural America. LightSquared makes up more than half of the roughly $4 billion fund.

Falcone often takes his time, relative to other hedge fund managers, in releasing monthly performance numbers.

Falcone's numbers for February stand in sharp contrast to the industry average where the Hennessee Group's monthly index shows the average fund gaining 1.72 percent in February, leaving it up 4.07 for the first two months of the year.

For Falcone's investors there seems to be little good news on the horizon. February's poor performance numbers follow similarly bad numbers for 2011 when the fund lost 47 percent because the LightSquared investment had to be revalued. While there was some improvement in performance in January, it did not last long as more problems hit LightSquared.

Since the government's warning that LightSquared would not be allowed to continue its build out, the Reston, Virginia-based company has had to lay off scores of employees and replaced its chief executive officer.

Falcone, who has bank rolled the company by having invested over $3 billion, however held out hope for LightSquared's future when he told investors on an investor call in mid-February that he remained committed to the project.

Outside auditors were responsible for marking the portfolio down and Falcone said it was out of his control, adding that he felt the revaluation was only temporary.