Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

5 billion-dollar tech gambles

The recession prompted many businesses cut back on risky bets -- but sometimes hitting home runs requires swinging for the fences. Here are 5 pricey gambles.

1 of 5
BACKNEXT
LightSquared
Investment: $4.7 billion to start

It's incredibly expensive to maintain and support a nationwide wireless network: Verizon spent $17 billion improving its network in 2009, and AT&T spent $19 billion over the past two years on upgrades. Thanks to costs like those, consolidation has been the industry's theme of the past decade, with several blockbuster mergers like Sprint/Nextel and Verizon/Alltel bulking up the space's Goliaths and wiping out its upstarts.

So when LightSquared announced in July that it would launch a new, built-from-scratch 4G-LTE (Long-Term Evolution) wireless network next year, it turned heads. Private-equity firm Harbinger Capital Partners, the venture's primary backer, seeded LightSquared with existing infrastructure valued at $2.9 billion. It also secured a commitment for additional financing of up to $1.75 billion.

LightSquared's business model is novel: The company says it doesn't plan to sell directly to consumers. Instead, it will wholesale its network to retailers and service providers -- think "Wal-Mart wireless" or MetroPCS 4G. By 2015, LightSquared intends to have its network covering 92% of the U.S. population.

But the market LightSquared is entering is an extremely expensive one to compete in. LightSquared has already inked a whopping $7 billion, eight-year contract with Nokia Siemens, which will design, build and maintain the new network. The final price tag could easily be higher: Clearwire, which is launching a nationwide 4G-WiMAX network for Sprint, is struggling to meet its budgeted buildout costs and timelines.

Dan Hays, a partner at consultancy PRTM who tracks the telecom field, says he expects LightSquared to be able to build its network for the stated amount -- but that's just the start of its expenses. As LightSpeed gains subscribers, it will need to scale by adding additional towers and capacity in heavily-utilized areas. Those upgrade costs can be several times higher than the initial cost of the network.

"Nextel, which built out a nationwide 2G wireless network, continued to invest several billion dollars per year to enhance and grow its network for more than a decade after its nationwide deployment," he says.


NEXT: Solyndra
Last updated August 26 2010: 12:40 PM ET
More Galleries
14 gifts gamers would actually want Whether you're shopping for a Pokémon GO fan or someone who owns every console ever made, we've got holiday shopping recommendations to suit everyone from beginners to the most discerning gamer. More
14 coolest toys for the holiday season Our list of must-have toys includes a self-hatching interactive pet, a coding toy for toddlers and a high-tech Barbie Dreamhouse. More
The 10 most expensive colleges this year The 10 most expensive colleges in the U.S. charge more than $66,000 for tuition, fees, room and board for the 2016-2017 school year. More

Special Offer