From III16 Jan 2012 19:41
Inmarsat drops after negative report on US partner LightSquaredUS agency says LightSquared network could interfere with GPS services
One of the day's big fallers is satellite services group Inmarsat after a negative US report on its partner LightSquared.
A special board formed to advise the US government announced that LightSquared's network would cause harmful interference to many GPS receivers. Given that Inmarsat receives payments from LightSquared under the terms of a spectrum sharing agreement, any doubt about the US group's future earnings has an immediate impact on sentiment towards Inmarsat. So following the US report, Inmarsat shares have dropped 31.8p to 388.2p, a 7.5% fall which makes the company the largest loser in the FTSE 250 index.
Analysts at JP Morgan said:
The [US agency] statement increases the pressure on the FCC [Federal Communications Commission] to remove the grant given to LightSquared to build a nationwide wireless network and represents a severe setback for LightSquared's future.
Based upon their testing and analysis, there seem to be no practical solutions or mitigations that would permit the LightSquared broadband service, as proposed, to operate in the next few months or years without significantly interfering with GPS and as a result, no additional testing is warranted at this time according to the committee.
We nevertheless believe that spectrum in the US remains valuable and therefore any owner of the LightSquared spectrum would continue to make the payments to Inmarsat. Of our 800p fair value for Inmarsat 100p are driven by the LightSquared payments.
It is also worth mentioning that LightSquared said the report was biased and it has filed a complaint with NASA.
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