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Open Range blames bankruptcy on spectrum, equipment

Fri, 10/07/2011 - 8:00am
Maisie Ramsay, Wireless Week

Rural wireless provider Open Range Communications filed for bankruptcy yesterday in Delaware and put its assets up for sale.

It was clear as long as a year ago that the company was on shaky ground. CED contributor Jeff Krauss reported that Globalstar, from which Open Range was leasing its spectrum, was having problems with private funding, causing it to miss deadlines and obligations.

The company will shut down if it is unable to find a buyer within 30 days. It laid off the majority of its workers on Wednesday, leaving just 48 employees in its Greenwood Village, Colo., headquarters.

Open Range has $114 million in assets and $110 million in liabilities.

The bankruptcy filing paints a picture of a company unable to emerge from problems not only with spectrum and funding, but also with the WiMAX equipment it hoped to deploy.

In 2009, Open Range secured a $267 million loan from the Rural Utilities Service (RUS) and a $100 million private equity loan from One Equity Partners to build out a WiMAX network on spectrum leased from Globalstar. The network was supposed to reach 50 million people. The government loan was the largest ever awarded by the RUS for broadband service.

But Open Range ran into trouble last fall when the FCC yanked Globalstar's waiver to use its satellite spectrum for ground-based mobile broadband service. Globalstar's failure to meet the FCC's conditions for its spectrum had earlier prompted the RUS to suspend its loan, creating major cash flow problems for Open Range.

Trouble with WiMAX equipment provided by Alvarion compounded Open Range's spectrum troubles.

"The system performance the company contracted from Alvarion was never achieved," Open Range wrote in its bankruptcy filing. The company claims the network covered just half of the area it expected. "Subscribers per sector that could be served were reduced by as much as 50 percent over that expected to be delivered, and in many other respects the network failed to achieve contractual specifications."

Alvarion could not be immediately reached for comment. It expects to take a one-time charge of $7 million because of Open Range's bankruptcy.

Problems with Globalstar and Alvarion prompted Open Range to sign an agreement with LightSquared in November of last year to be the exclusive rural partner for its planned LTE network. It is not clear how the bankruptcy filing will affect that deal.

Open Range also held talks with Clearwire about an "affiliate relationship" for its WiMAX service, and it even discussed buying some of Clearwire's spectrum.

The company's situation continued to worsen over the course of this spring. A backlog of funding requests from the RUS put pressure on its business partners and further strained its relationship with vendors. The RUS also restructured its loan, reducing its commitment to $180 million, and the private equity firm reduced the amount it pledged to $40 million.

Open Range has about 26,000 customers in 12 states, including Wisconsin, Arkansas, Illinois, Georgia, South Carolina, Pennsylvania, Colorado, Indiana, Alabama, California, Ohio and Delaware. It appears that service for those customers will go dark if Open Range is not acquired by another company.

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