New York hedge fund manager Phil Falcone wants to build the next internet superhighway. He is snapping up broadband spectrum which he plans to deploy for the next generation of mobile devices, a 4G network that will power super speed smartphones.
But critics say Falcone doesn’t have the funds for such an ambitious project. His hedge fund, Harbinger Capital Partners, controls about $9 billion across a variety of investments. Telecom analysts like Jonathan Chaplin of Credit Suisse point out that competitors like Clearwire invested $11.6 billion to create their 4G network. “It’s not clear that the capital to put the model into practice is available,” says Chaplin of Falcone’s ambitions.
“We’ve got one of the most valuable and limited resources in the United States,” Falcone told Forbes of his spectrum holdings. But his competitors aren’t struggling for resources. Sprint has already rolled out its 4G network. Verizon plans to have 4G in 30 cities by the end of 2010. AT&T says it will have 4G by 2011. Falcone, meanwhile, is looking to complete the first phase of his network by 2012 and complete nationwide coverage by 2015.
Falcone will have an uphill battle convincing consumers to switch from established cell phone network to his startup. Without a partner that can supply terrestrial 3G coverage, Falcone’s 4G network, which runs on satellites, won’t function inside most buildings. That sounds like a deal breaker, unless Falcone’s going exclusively after iPhone users in NY and San Fran. Those folks don’t expect phones to be able to make calls at all.