LightSquared, the telecom start-up backed by hedge fund manager Philip Falcone, called for new tests of its mobile system to examine interference concerns after it accused the latest government tests of being rigged.
The new tests could take two months, forcing LightSquared to miss a January deadline for government approval of a high-speed wireless network it wants to build.
The January deadline was imposed by Sprint Nextel Corp, LightSquared's partner in deploying and operating its planned network. It is unclear whether Sprint would stay on board if LightSquared misses the deadline.
A Sprint spokesman could not immediately be reached for comment.
LightSquared has spent more than $1 million on lobbying efforts in Washington to try to gain approval for its wireless network, but is fighting an uphill battle as opponents point to safety and national security risks associated with interference to GPS.
The company reported a $427 million net loss for the first nine months of 2011 and could run out of money this year if it cannot raise additional capital and financing.
A failure of LightSquared would be another jolt to investors in Falcone's Harbinger Capital Partners hedge fund, which has committed more than $3 billion in equity and loan commitments to the company. Falcone gained fame after making billions in 2007 by shorting subprime mortgages.
Recent government tests found that the LightSquared network would interfere with global positioning system devices.
In order to build its network LightSquared needs regulatory approval from both the Federal Communications Commission and the Defense Department. Both agencies are looking for assurances that the network would not interfere with GPS - used for everything from aviation safety to farming.
Sprint, which agreed to share network infrastructure with LightSquared to cut costs, has already extended its deadline by 30 days for LightSquared to receive regulatory clearance for this service, giving it until the end of January.
But executives representing LightSquared told reporters on a conference call on Wednesday that they are now hoping for new tests of their system as they disputed the transparency and accuracy of the latest studies.
Ed Thomas, a LightSquared consultant who formerly worked for the FCC, estimated that if new tests were carried out they could be completed in about two months. This would mean missing Sprint's deadline.
Jeff Carlisle, a LightSquared representative, told reporters on the call that LightSquared is keeping Sprint informed, but he declined to comment on whether the operator was ready to extend the deadline.
LightSquared agreed in July to pay Sprint $9 billion over 11 years to build out a wireless network LightSquared could use to offer its own wholesale telecommunications services. Under their deal, Sprint could also use the LightSquared spectrum.
LightSquared contends that any interference is a result of poorly designed GPS receivers that GPS manufacturers should be obliged to fix. LightSquared has teamed up with other companies to design filters that it says would fix the interference issues.
On Wednesday's call with reporters, LightSquared executives sharply criticized testing that was carried out for the Space-based Positioning, Navigation and Timing Executive Committee (PNT EXCOM).
The company has already asked for an investigation of the PNT advisory board due to a possible conflict of interest as the vice-chairman of the board is also a director for GPS supplier Trimble Navigation Ltd
LightSquared said the test that found harmful interference problems was rigged by GPS device makers. It also complained that the test process was shrouded in secrecy and deliberately used older GPS devices more prone to interference issues.
Jim Kirkland, vice president and general counsel of Trimble, a founding member of The Coalition to Save Our GPS, said LightSquared continues to try to change the parameters or cry foul every time test results do not come out in its favor.
The technical evidence speaks for itself and no individual, company or government body can legitimately be blamed for the clear defects of LightSquared's ill-conceived proposal or the failure of that proposal to pass an extensive, fact-based review process, Kirkland said in a statement.
A spokesman for the Space-Based Positioning, Navigation and Timing group declined to comment.
Analysts have questioned whether LightSquared can survive long enough to gain approval. LightSquared executives told reporters the company has several quarters' worth of funding available, in response to a question on whether it risks running out of money before it gains approval.
(Reporting By Sinead Carew in New York; Additional reporting by Jasmin Melvin in Washington)