Phil Falcone & Harbinger's 4G Wireless Network Bet: LightSquared

Philip Falcone's hedge fund Harbinger Capital Partners has invested $2.9 billion into private 4G wireless network: LightSquared. We've detailed Harbinger's 4G bet before, but Falcone yesterday was interviewed by Maria Bartiromo from the Delivering Alpha Conference.

His whole goal with this venture is to bring powerful wireless broadband to rural areas in an attempt to essentially blanket America with coverage. He says that the future is all about smartphones and tablets, and those devices need access to wireless networks.

Too Big of a Bet?

Critics have said that Harbinger has essentially morphed into a private equity fund or venture firm by allocating so much capital to one private investment. Falcone addresses this by saying that there's "a real asset here" as he first started looking at it five or six years ago.

He thinks the venture will change the wireless market. While he acknowledges that this single bet is quite large for one fund, he believes people would understand how valuable this is from both a capital and social perspective if they were around the everyday workings like he is.

GPS Interference?

Regarding the claims that LightSquared interferes with GPS, Falcone says that GPS is actually using their spectrum as they were given the right to build on that spectrum and the GPS manufacturers knew it. Falcone says that, "they're interfering with us, we're not interfering with them."

Embedded below is the video of Falcone's interview from the Delivering Alpha conference:



Falcone also presented his idea of going long Spectrum Brands (SPB) at the conference on the hedge fund best ideas panel which we also covered.

Hedge Fund Harbinger Capital Plans 4G Wireless Network

Philip Falcone's hedge fund firm Harbinger Capital Partners recently unveiled quite a plan. They have thrown their hat into the ring of next generation wireless build-out as they've planned a 4G wireless network that will cover the majority of the country by 2015. This announcement comes right after Harbinger received approval from the Federal Communications Commission (FCC) to take control of SkyTerra (SKYT) on March 26th. Falcone will be assembling a network utilizing the LTE (Long Term Evolution) format, a technology that mainstream wireless providers like AT&T and Verizon have already invested heavily in.

In order to do so, Falcone plans to use his satellite investments, SkyTerra (SKYT) and TerreStar (TSTR). Readers of MarketFolly will already know that we've covered Harbinger's investment in these two companies for quite some time. We first mentioned Harbinger's TerreStar stake back in October of 2008. We then also posted about Harbinger's SkyTerra stake in February of 2009 and noted how they were ramping up their position in TerreStar in April of 2009. So, this is something that has been in the works for quite some time and Falcone seems confident that LTE is the way of the future.

Others might be intrigued to find that Harbinger also started a sizable position in Sprint Nextel (S) in the fourth quarter of 2009. Wireless connoisseurs will already know that both Sprint and Clearwire have been working on a high-speed network of their own, WiMax. So, regardless of which format wins out (WiMax versus LTE), Falcone has bets in both wireless 4G arenas. It does seem, however, that his larger bet is on LTE. You can view the rest of Harbinger's portfolio here.

For the specifics of Harbinger's LTE plan, we defer to GigaOm's summary as well as analyst Tim Farrar's take, both of which we highly recommend you read.

After all this, one thing's for certain: hedge funds love the play on wireless spectrum, data & smartphones. It's quite clear they see a bright and profitable future there. What's most interesting is the dynamic of how they each are making slightly different bets. As evidenced above, Harbinger is playing spectrum. We've also seen plenty of managers invest in the smartphone theme via Apple (AAPL) and a plethora of hedgies invest in wireless tower stocks such as American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC). Many hedge funds, like Matt Iorio's White Elm Capital, have invested in both. We also make note that many of those stocks grace Goldman Sachs' VIP list of the most important stocks to hedge funds. While the investments vary, the theme is consistent: increased demand for wireless transmission of information, be it voice, data, or both.