Hedge Fund Harbinger Capital Consummates Skyterra Communications Merger

Just a few days ago we touched on how Philip Falcone's hedge fund Harbinger Capital Partners announced plans for a 4G wireless network as spectrum is apparently the hottest new asset class out there. They are doing so via their stakes in TerreStar (TSTR) and Skyterra Communications (SKYT) and yesterday after the market close we see that they filed an amended 13D and a Form 4 with the SEC, providing us an update as to what's going on behind the scenes. Simply put, Harbinger acquired 45,147,477 shares of stock and paid $5.00 in cash per share for each totaling $225,737,385. Upon the completion of this transaction, the stock was canceled and ceased to exist (i.e. merger complete). As such, the company is now privately held with no public market for stock.

Before we dive into the legal jargon, we'll just preface this in layman's terms by saying that all you really need to know is that the merger between SKYT and Harbinger was consummated. On March 29th, Harbinger acquired 23,042,077 shares of voting common stock at $5 per share and 22,105,400 non-voting shares at the same price. This transaction was part of Harbinger's acquisition of Skyterra through a merger and all shares of common stock not previously held by Falcone's hedge fund firm were "converted into a right to receive $5.00 in cash, subsequently canceled and ceased to exist." Additionally, all warrants were canceled and ceased to exist as well. So, this appears to be one of the first major steps towards their play on spectrum and make sure you head to their plans for a 4G wireless network.

Other recent activity out of hedge fund Harbinger includes selling some New York Times (NYT) shares and you can view the rest of Falcone's equity portfolio here.

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.