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A report out of Bloomberg today elucidates the position of Phil Falcone’s Lightquared and describes the position of Carl Icahn in the company’s future. Icahn is a large holder of debt in Lightquared.

He along with  other investors own $300 million of the company’s debt, bought last December. The conflict could lead to a fight for control of the company as it slides further into disrepair.

Lightsquared has faced mounting troubles in recent months as the company has seen its spectrum devalued after the FCC issued an order that disallowed their using it. The frequencies owned by Lightsquared were found to be interfering with GPS signals leading to concerns from the military and commercial institutions such as Garmin, the GPS device manufacturer.

Just one month ago today Sprint Nextel Corporation (NYSE:S) ended a deal with Lightsquared that would have seen Falcone’s company offer 4G capabilities along with the carrier’s network.  That had been a 15 year deal worth $9 billion now worthless to the company.

Sprint Nextel Corporation (NYSE:S) had to back out based on the apparent uselessness of Lightsquared’s network. Falcone is left holding a company that he invested hugely in worth almost nothing as its main asset, the spectrum it holds, is now seemingly unusable.

The battle between Icahn and Falcone is set to play out bitterly. Falcone has been vocal in his opposition to bankruptcy, seeing his $2.9 billion investment in the company wasted, but Icahn has been heard encouraging that as an avenue of opportunity for him.

He would see a loan for equity deal that would oust Falcone at the firm and leave Icahn with a stronger hold on the company’s spectrum which could be an asset worth more in the future. His 300 million holding of debt is a first year loan that gives Icahn a high level of control in deciding the fate of the company.

Falcone has threatened to take legal action against the government in response to the FCC’s blockage of its plans. Falcone states that his, and Lightsquared’s ambitions, were actively encouraged by the FCC and it was that that led him and others to invest so much in the company.

The building of Lightsquared was accompanied by a mandate that the spectrum be used to roll out a network. Falcone alledges that the FCC changed the rules and destroyed his business.

The battle will undoubtedly continue. Icahn and the other investors have decided to wait until the end of this month to decide whether or not to call in the loan and force action at the company. The war between Icahn and Falcone is going to get nasty if the former decides to call in the loans given to the company.

Falcone’s Harbringer Capital Partners LLC had a terrible 2011 and some of its poor performance was certainly due to Lightquared. The hedge fund lost $23 billion since its peak in 2008 giving it the dubious accolade of having lost more than any hedge fund in history.

Falcone’s luck does not seem to be improving. His bet on setting up a new data network from scratch was a loser and he’ll have to get out from under it any way he can.