Hedge fund manager Philip Falcone has joined the board of LightSquared, the cash-strapped company backed by his firm Harbinger Capital Partners, as he seeks a bigger role in the telecom startup whose chief executive has just resigned.
LightSquared said on Tuesday that Sanjay Ahuja, a telecommunications industry veteran, has stepped down as chief executive. This came just two weeks after the Federal Communications Commission dealt the company a major blow by saying it would bar it from building a wireless network that would interfere with other satellite services.
Last week LightSquared said it would lay off nearly half of its staff of 330 to save money. This came days after it had failed to pay a $56.25 million payment due to Inmarsat, a UK satellite company with which it has a spectrum-sharing agreement.
While some industry analysts have speculated that bankruptcy might be on the cards, Falcone - whose Harbinger Capital Partners is the single biggest investor in LightSquared - ruled out that option. He said on Tuesday that the company is taking a more aggressive approach to its finances.
Ahuja, who has served as CEO since 2010, will remain as chairman. LightSquared declined to elaborate on why he quit the top job. The company expects to complete its search for a new CEO "in the near future," according to a statement, which did not say who would stand in the meantime.
LightSquared representatives declined to comment further.
The company already has a shortlist of candidates with experience in the telecommunications industry and dealing with Washington politics, and hopes to decide on a new CEO in about a month, according to one person familiar with the executive search process who asked not to be named.
After a bruising year of back and forth with lawmakers in Washington, Falcone shows no signs of backing down in his quest to gain approval to build a network.
LightSquared will take "an aggressive approach to its finances to ensure that it has adequate financial runway" while it continues to look for a way to build the network, Falcone said in a statement that gave no further details on his plans.
The company has already hired investment bank Moelis & Co as a restructuring advisor, according to sources.
Falcone invested more than 60 percent of Harbinger's $4 billion assets in LightSquared and his fund is the biggest equity owner. Last year Harbinger lost 47 percent of its value after Falcone marked down the value of LightSquared in the portfolio.
Falcone spent billions of dollars to buy spectrum licenses and pursue plans to build a high-speed wireless network on which LightSquared would offer wholesale services to other operators which are facing a scarcity of spectrum.
But the bet turned sour when tests showed that the network LightSquared wanted to build would interfere with Global Positioning Systems that are used by everybody from airlines and the military to construction companies and farmers.
LightSquared said that Chief Network Officer Doug Smith and Chief Financial Officer Marc Montagner will serve as interim co-chief operating officers.
(Reporting by Sinead Carew; Editing by Gerald E. McCormick and Richard Chang)