Who in the Wireless World Is Philip Falcone?

This is an interesting story that no one is really talking about yet. If all goes according to the plans of Philip Falcone, Harbinger Capital Partners will turn into the newest competitor in the wireless industry.

“LightSquared,” as the new venture will be called, will offer a wireless data service that sounds a lot like what Clearwire is doing. It will also compete with AT&T, Verizon, Sprint and T-Mobile on the wireless data side of their businesses.

Clearwire seems to be doing well at this early stage in its buildout. So what are the odds that Harbinger will be the next successful company in the wireless space? It has no brand name, but it does have someone who likes to try new things and succeed.

If I were writing my next book on this man and company and opportunity, I would say this is one of the most interesting stories we have seen in the last 10 to 20 years. What happens next has everyone guessing.

New Ball Game

A few years ago, my brother worked with Phil Falcone, founder of Harbinger and leader of its investment team, but I never heard of this venture. This opportunity could be very large over the next several years as the wireless data business in general continues to change and grow rapidly.

We are watching the Apple iPhone and Google Android and others transform this business. Apps are one of the fastest-growing segments. They numbered in the measly hundreds a few short years ago, but there are a few hundred thousand today, and the category is still growing.

The wireless industry itself is transforming. It used to be a race to sign up first-time wireless phone customers. Today, nearly everyone who wants one has one. So growth comes from different sources. Carriers compete against each other. They compete on wireless data traffic, and they will compete on advancing new wireless opportunities.

The space is changing. New brand names are ruling. There’s the Apple iPhone and theGoogle Android; Clearwire, Dell, Lenovo and others will jump in as well.

Harbinger has aggressive plans, but can there be room for such a new player that no one has ever heard of? It is possible, perhaps, if the firm follows the right steps.

The question is how well does a private hedge fund in New York City called “Harbinger Capital Partners” understand the intricacies of the wireless data business? Isn’t Harbinger in the investment business? What does it know about the satellite or wireless industry? About relating to millions of customers?

The worst-case scenario if this does not work is that Phil Falcone can sell his new wireless properties to any of the existing competitors. So, meaningful loss does not seem like it is a possibility here — even though loss is always a possibility. Who knows? That could be the plan all along.

Cable television companies like Comcast and Time Warner failed when they tried to offer Sprint wireless phones a few years ago. How will Harbinger do better with no retail experience and no customers?

That’s what many are asking, and it is a good question. We have watched the industry change and transform itself over the last decade or two — except all the innovation has come from solidly wireless companies and networks.

Even the new competitor Clearwire was started by Sprint and has companies like Comcast and Time Warner selling its service to their customers. Now we have a newcomer at the party. Harbinger is not a wireless company. It is not even a technology company.

It makes nothing. It sells nothing. It is a hedge fund — a very successful company, but one that has nothing to do with wireless technology or the wireless industry. And it has no customers.

New Rules

Apple and Google are not wireless companies — that is true. Still, they already have millions of customers to market their new wireless phones to, and they do it very successfully.

However, Harbinger has no customers using other services whom they can persuade to try their new wireless data service. This plan seems to have a lot of challenges.

That said, never count Falcone out. I have been impressed watching him over the last several years. The industry continues to change. Winners today are doing new things never done before in wireless. An outsider can indeed be successful in this space by targeting a new opportunity and attacking it in a new way so that it doesn’t have to really compete in a traditional sense.

That takes not only moxie, which Falcone seems to have in boatloads, but also marketing knowledge and expertise. What he’s got in those areas is less clear.

Phil Falcone recently hired Sanjiv Ahuja, the former chief of France Telecom mobile unit Orange, to head up this new company. That may indeed be a benefit. Ahuja brought in Frank Boulben as CMO. They are quietly and quickly building a team.

However, the challenges are big and many. Then again, so are the opportunities. Harbinger will have to hire many very experienced senior executives to have a chance at making this work. We don’t know where they are in this area yet.

Harbinger has not told the world details of what its plans are yet, because it is a private company. It sounds as though it plans to create a high-speed wireless data network in the United States. It wants to use its recently acquired SkyTerra, a mobile satellite communications service that allows communication via satellites instead of cell towers.

Falcone is now trying to get more large investors. Does it plan to be a satellite provider, or mix that with building a wireless data network? There are more questions than answers at this point in the process.

Many are asking this question: Does Harbinger plan to build a real company and be a real competitor? Or is this just the first step in a larger investment plan — i.e., create something of value, then sell it to another company for a large profit? We don’t know yet whether Harbinger will become a real brand name in the wireless space.

Wireless is a hard game to win — even for brand names in the business. Look at Sprint’s and T-Mobile’s challenges in recent years, and Comcast’s and Time Warner’s fumble. All we can do is speculate at this point. So stay tuned — this could be getting interesting.