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In the never-ending battle for LightSquared, a new chapter has opened for the wireless company. Billionaire Carl Icahn is taking on hedge-fund big wig Phil Falcone to determine the fate of the company by looking at bankruptcy as an option.

Falcone’s vested interest in LightSquared came from his $2.9 billion investment to save the company while battling federal regulators over it. He has been very open in his opposition to bankruptcy.

The New York Post reported on Wednesday that Icahn, who is a LightSquared creditor, is pushing for the bankruptcy to help with a plan to provide equity stakes and more control for its future. The clock is ticking for creditors to take action.

Icahn, as well as other owners of LightSquared’s $1.6 billion 2014 loan, set an end of April due date to determine whether or not to place LightSquared into default for violating loan covenants associated with customer contracts. Plan B for the creditors is to ask for an extension to create a plan.

With Icahn at the helm, his proposal and subsequent debt for equity arrangement could usher Falcone out. Hence the opposition?

Falcone has slowly watched Icahn pick away at the LightSquared project as the money man jumped onto the scene along with fellow investors David Tepper and Andrew Beal through their $300 million purchase of the company’s first lien loan back in December.

Back in January, Falcone said of Icahn’s January investment, ” Carl is certainly entitled to his opinion, as I am entitled to disagree with it.”

The debt has currently been trading around 47 cents to 48 cents on the dollar; this is a slight rise after LightSquared’s recent loan interest payment.

Tough 2012 for LightSquared

It’s already been a tough year for LightSquared as Sprint Nextel (NYSE:S) bailed as its main carrier. The company has also not made two “milestone”” payments owed to the UK satellite company Inmarsat, who has been working with them to coordinate wireless spectrum for a contiguous band.

In February, the FCC said it would stop the launch of LightSquared’s lofty plans after receiving opposition from numerous industries such as agriculture and defense. Complains arose that the company’s network caused interference to GPS devices found in planes and tractors.

Then in March, LightSquared accused the regulator of breach of contract, noting that $4 billion had been spent on the project because it was “encouraged — and, indeed, affirmatively required” to help the FCC in its mandate to widen national broadband service. LightSquared also suggested a possible lawsuit should FCC pursue its threat.

Ichan and Falcone have not commented on the story.