Harbinger owned 31 percent of TerreStar as of June 30; its shares were down 49 percent for the year as of Sept. 28, to 48 cents. In August, the company warned in a regulatory filing that it would have to declare bankruptcy if it couldn't borrow more money to operate a satellite that it launched in July 2009.

Investors have already lost patience. Falcone is liquidating about 80 percent of his $2 billion Special Situations Fund, which holds a chunk of the LightSquared investment, at the request of clients, investors say. Falcone has been trying since June to raise $1 billion to $1.5 billion for LightSquared from investors who would be willing to commit capital for several years, according to potential investors who have seen the marketing documents.

Spectrum Shortage

That money would be used to buy some of the wireless bet from his two hedge funds. As of mid-September, he had no takers. Falcone declined to comment on the matter.

Falcone is betting that the boom in wireless data triggered by Apple Inc.'s iPhone and Google Inc.'s Android operating system for mobile phones will create a shortage of spectrum -- the radio frequencies needed to transmit phone calls, Web pages, YouTube videos and Twitter updates over the air.

"Spectrum, by its nature, is a finite resource," Falcone says. "I'm a big believer in finite resources."

The U.S. government leases rights to the frequencies. Data traffic on AT&T's network, where the iPhone operates, grew 5,000 percent in the three years after that device came out, the Dallas-based company says.

Unlike AT&T and Verizon, LightSquared won't run its own, branded wireless service. It will sell space on the network at wholesale prices to other carriers, retailers and media companies.

Selling Wholesale

If Apple wanted to sell iPhones that run on an Apple- branded network, for example, it could contract with LightSquared for the capacity.

Investors who stick with Falcone must accept that he makes big bets that don't always work out. Falcone's most public blunder was paying an estimated $500 million for almost 20 percent of the New York Times's publicly traded Class A shares. The company is controlled by the family of Times publisher Arthur Ochs Sulzberger Jr. through their Class B shares, which give them the right to appoint 9 of the 13 directors.