TerreStar units fight $104 million claim from Sprint

Reuters News
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Posted: Jun 22, 2011 11:54 AM
TerreStar units fight $104 million claim from Sprint

By Nick Brown

NEW YORK (Reuters) - Affiliates of TerreStar Networks Inc <TSTRT.UL> say they do not owe Sprint Nextel Corp <S.N> reimbursement for costs related to clearing spectrum bands because they were never licensees of the bandwidth.

In court papers filed Monday in U.S. Bankruptcy Court in Manhattan, TerreStar National Services Inc, TerreStar Canada and two other units of the bankrupt telecommunications firm asked Judge Sean Lane to rule that Sprint cannot come after them for about $104 million in reimbursement claims.

TerreStar, which went bankrupt in October 2010, is planning to sell its business to emerge from bankruptcy. The affiliates listed in Monday's filing are also part of the bankruptcy, according to the filing.

Sprint asserted about $104 million in claims against each of the TerreStar entities. It cited a Federal Communications Commission rule requiring new spectrum licensees to help incumbents pay for certain costs, namely the relocation of displaced former occupants of the spectrum bandwidth. .

The TerreStar affiliates argued that, while TerreStar Networks Inc licensed the bandwidth, the affiliates were never named as licensees and do not owe Sprint for reimbursement.

The affiliates said Sprint is relying too heavily on the FCC's stated view that reimbursement obligations should extend beyond nominal licensees. That view has never become an official rule and could not be applied retroactively, the affiliates said.

A Sprint spokesman declined to comment, as did a spokeswoman for TerreStar. An attorney for TerreStar did not return a voice message.

TerreStar has been busy seeking a buyer for its assets and hopes to hold an auction June 30. The company will seek court approval Tuesday on a baseline or "stalking horse" bid of $1.38 billion from Dish Network Corp <DISH.O>.

If Dish, owned by billionaire Charles Ergen, ultimately emerges as the winning bidder, TerreStar would become the latest piece of a burgeoning satellite empire. In addition to Dish, Ergen already owns EchoStar Corp <SATS.O> and Blockbuster Inc <BLOAQ.PK>, and in March won a bid through Dish to acquire bankrupt DBSD North America.

The case is in re: TerreStar Networks Inc., U.S. Bankruptcy Court, Southern District of New York, No. 10-15446.

(Reporting by Nicholas Brown; Editing by Lisa Shumaker)