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Qwest in talks to invest in network

A hedge fund trying to launch a high-speed wireless venture courts partners.


By Spencer E. Ante
The Wall Street Journal

April 29, 2010


NEW YORK Hedge fund Harbinger Capital Partners has tapped Sanjiv Ahuja, the former chief executive of France Telecom SA's mobile unit Orange, to head up its risky effort to create a high-speed wireless network in the U.S., people familiar with the matter said this week.

Harbinger also is in talks with potential strategic investors for the venture. They include Qwest and SK Holdings, people familiar with the matter said Tuesday. Harbinger is attempting to raise between $1 billion and $2 billion in equity and bank financing to fund the venture.

It had hoped to announce investments by the two companies and the hiring of Ahuja as CEO this week, but completing the talks has taken longer than expected, the sources said.

Sticking points include disagreements over the size of the individual investments and related equity stakes, as well as disputes over the composition of the board, one source said.

Having spent four years and more than $2 billion on the venture so far, Harbinger CEO Philip Falcone is trying to retain as much equity as he can in the venture, one person said.

Harbinger continues to hold talks with Qwest, SK Holdings and other potential investors. Qwest declined to comment. SK Holdings couldn't be reached.

Falcone, betting there won't be enough capacity to satisfy rising demand for mobile data services, wants to offer high-speed wireless service on a wholesale basis using satellite spectrum owned by his fund. The target customers would be phone companies, cable operators and others that want to offer wireless service in underserved areas.

The plan poses tricky financial, technological and managerial challenges.

Harbinger plans to start offering the service in trial markets Phoenix and Denver, with a commercial launch before the third quarter of 2011.

Qwest, SK Holdings and other investors could help with capital costs and the network build-out, as well as providing operating expertise, the people familiar with the matter said.