----

----

|                                                                               |                                                                                                                                       |
|------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| **UNITED                        STATES**                                           |
| **SECURITIES AND                        EXCHANGE COMMISSION**                      |
| **Washington, D.C.                        20549**                                  |
|                                                                               |
|                                                                                    |
|                                                                               |
| **FORM                        10-Q**                                               |
|                                                                               |
|                                                                                    |
|                                                                               |
| (Mark                        One)                                                  |
|                                                                               |
| x                                                                                  | **QUARTERLY REPORT                        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                        1934**  |
|                                                                               |                                                                                                                                       |
| For                        the quarterly period ended March 31, 2008               |
|                                                                               |
| OR                                                                                 |
|                                                                               |                                                                                                                                       |
| o                                                                                  | **TRANSITION REPORT                        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                        1934** |
|                                                                               |
| For                        the transition period from ____________ to ____________ |
|                                                                               |
| Commission File Number:                        000-13865                           |
|                                                                               |
|                                                                                    |
|                                                                               |
| **SKYTERRA                        COMMUNICATIONS, INC.**                           |
| **(Exact name of                        registrant as specified in its charter)**  |
|                                                                               |
|                                                                                    |
|                                                                                  |   |                                           |
|---------------------------------------------------------------------------------------|--------|------------------------------------------------|
| **Delaware**                                                                          |   | **23-2368845**                                 |
| **(State or other                        jurisdiction of**                            |   | **(I.R.S.                        Employer**    |
| **incorporation or                        organization)**                             |   | **Identification                        No.)** |
|                                                                                  |   |                                           |
| **10802 Parkridge                        Boulevard, Reston, VA 20191**                |   | **20191**                                      |
| **(Address of                        principal executive offices)**                   |   | **(Zip                        Code)**          |
|                                                                                  |   |                                           |
| **(703)                        390-1899**                                             |
| **(Registrant’s                        telephone number, including area code)** |
|                                                                                  |   |                                           |
|                                                                                       |

Indicate by check mark whether            the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of            the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter            period that the registrant was required to file such reports), and (2) has been subject            to such filing requirements for the past 90 days. YesxNoo

Indicate by check mark whether            the registrant is a large accelerated filer, an accelerated filer, a non-accelerated            filer, or a smaller reporting company. See the definitions of “large accelerated            filer”, “accelerated filer” and “smaller reporting            company” in Rule 12b-2 of the Exchange Act. (Check one):
|                                             |                                       |                                              |                                               |
|--------------------------------------------------|--------------------------------------------|---------------------------------------------------|----------------------------------------------------|
| Large accelerated filer                        x | Accelerated filer                        o | Non-accelerated filer                        o    | Smaller reporting                        company o |
|                                             |                                       | (Do                        not check if a smaller |                                               |
|                                             |                                       | reporting                        company)         |                                               |

Indicate by check mark whether            the registrant is a shell company (as defined in Rule 12b-2 of the Act).            Yes   o    No              x

As of April 16, 2008 there were            34,302,663 shares of the Company’s voting common stock and 72,612,414 shares            of the Company’s non-voting common stock outstanding.

----

----

**SKYTERRA            COMMUNICATIONS, INC.**

**INDEX**

|                                                            |                                                                                                                                      |                                                                                                                                                              |   |   |
|-----------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| **PART I                        – Financial Information** |                                                                                                                                      | 1                                                                                                                                                                 |
|                                                            |                                                                                                                                      |                                                                                                                                                              |   |
| **Item                        1.**                              | Financial                        Statements                                                                                               |                                                                                                                                                              | 1      |
|                                                            |                                                                                                                                      | Unaudited                        Condensed Consolidated Statements of Operations for the Three Months Ended                        March 31, 2008 and 2007        |   | 1      |
|                                                            |                                                                                                                                      | Unaudited                        Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31,                        2007                          |   | 2      |
|                                                            |                                                                                                                                      | Unaudited                        Condensed Consolidated Statements of Stockholders’ Equity for the                        Three Months Ended March 31, 2008 |   | 3      |
|                                                            |                                                                                                                                      | Unaudited                        Condensed Consolidated Statements of Cash Flows for the Three Months Ended                        March 31, 2008 and 2007        |   | 4      |
|                                                            |                                                                                                                                      | Notes to                        Unaudited Condensed Consolidated Financial Statements                                                                             |   | 5      |
|                                                            |                                                                                                                                      |                                                                                                                                                              |   |
| **Item                        2.**                              | Management’s                        Discussion and Analysis of Financial Condition and Results of                        Operations |                                                                                                                                                              | 19     |
| **Item                        3.**                              | Quantitative                        and Qualitative Disclosures About Market Risk                                                         |                                                                                                                                                              | 35     |
| **Item                        4.**                              | Controls                        and Procedures                                                                                            |                                                                                                                                                              | 36     |
|                                                            |                                                                                                                                      |                                                                                                                                                              |   |
| **PART                        II – Other Information**    |                                                                                                                                      | 37                                                                                                                                                                |
|                                                            |                                                                                                                                      |                                                                                                                                                              |   |
| **Item                        1.**                              | Legal                        Proceedings                                                                                                  |                                                                                                                                                              | 37     |
| **Item                        1A.**                             | Risk                        Factors                                                                                                       |                                                                                                                                                              | 37     |
| **Item                        2.**                              | Unregistered                        Sales of Equity Securities and Use of Proceeds                                                        |                                                                                                                                                              | 38     |
| **Item                        3.**                              | Defaults                        Upon Senior Securities                                                                                    |                                                                                                                                                              | 38     |
| **Item                        4.**                              | Submission                        of Matters to a Vote of Security Holders                                                                |                                                                                                                                                              | 38     |
| **Item                        5.**                              | Other                        Information                                                                                                  |                                                                                                                                                              | 38     |
| **Item                        6.**                              | Exhibits                                                                                                                                  |                                                                                                                                                              | 43     |
|                                                            | Signatures                                                                                                                                |                                                                                                                                                              | 44     |

----

|                                                    |                                            |
|---------------------------------------------------------|-------------------------------------------------|
| **PART                        I FINANCIAL INFORMATION** |
|                                                    |                                            |
| **Item                        1.**                      | **Financial                        Statements** |

**SkyTerra            Communications, Inc.**

**Condensed            Consolidated Statements of Operations            (in thousands, except share and per share data)            (unaudited)**

|                                                                                                |   |                                                                           |        |     |   |       |   |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|-------------|----------|--------|------------|--------|
|                                                                                                |   | **Three months                        ended                        March 31,** |        |
|                                                                                                |   |                                                                                |        |
|                                                                                                |   |                                                                           |        |     |   |
|                                                                                                |   | **2008**                                                                       |        | **2007** |   |
|                                                                                                |   |                                                                                |        |          |   |
| Revenues:                                                                                           |   |                                                                           |        |     |   |       |   |
| Services and related                        revenues                                                |   | $                                                                              | 7,115       |     | $      | 6,694      |   |
| Equipment                        sales                                                              |   |                                                                           | 1,222       |     |   | 1,186      |   |
| Other                        revenues                                                               |   |                                                                           | 256         |     |   | 222        |   |
|                                                                                                |   |                                                                                |             |     |        |            |   |
| Total                        revenues                                                               |   |                                                                           | 8,593       |     |   | 8,102      |   |
|                                                                                                |   |                                                                           |        |     |   |       |   |
| Operating                        expenses:                                                          |   |                                                                           |        |     |   |       |   |
| Cost of equipment                        sold                                                       |   |                                                                           | 974         |     |   | 981        |   |
| Operations and cost of                        services (exclusive of depreciation and amortization) |   |                                                                           | 6,663       |     |   | 5,453      |   |
| Sales and                        marketing                                                          |   |                                                                           | 2,643       |     |   | 1,017      |   |
| Research and                        development (exclusive of depreciation and amortization)        |   |                                                                           | 4,107       |     |   | 2,075      |   |
| General and                        administrative                                                   |   |                                                                           | 7,577       |     |   | 7,689      |   |
| Depreciation and                        amortization                                                |   |                                                                           | 8,081       |     |   | 6,347      |   |
|                                                                                                |   |                                                                                |             |     |        |            |   |
| Total operating                        expenses                                                     |   |                                                                           | 30,045      |     |   | 23,562     |   |
|                                                                                                |   |                                                                           |        |     |   |       |   |
| Operating                        loss                                                               |   |                                                                           | (21,452     | )        |   | (15,460    | )      |
| Other income                        (expense):                                                      |   |                                                                           |        |     |   |       |   |
| Interest                        income                                                              |   |                                                                           | 3,221       |     |   | 5,848      |   |
| Interest                        expense                                                             |   |                                                                           | (11,716     | )        |   | (12,129    | )      |
| Impairment of                        investment in TerreStar Networks                               |   |                                                                           | (8,353      | )        |   | —    |   |
| Other income,                        net                                                            |   |                                                                           | 664         |     |   | 132        |   |
|                                                                                                |   |                                                                                |             |     |        |            |   |
| Loss before income                        taxes                                                |   |                                                                           | (37,636     | )        |   | (21,609    | )      |
| Income tax benefit                        (provision)                                               |   |                                                                           | 275         |     |   | (8         | )      |
| Minority                        interest                                                            |   |                                                                           | 151         |     |   | 1,800      |   |
|                                                                                                |   |                                                                                |             |     |        |            |   |
| Net loss                                                                                            |   | $                                                                              | (37,210     | )        | $      | (19,817    | )      |
|                                                                                                |   |                                                                                |             |     |        |            |   |
|                                                                                                |   |                                                                           |        |     |   |       |   |
| Basic and diluted loss                        per common share                                      |   | $                                                                              | (0.35       | )        | $      | (0.21      | )      |
| Basic and diluted                        weighted average common shares outstanding                 |   |                                                                           | 106,030,078 |     |   | 93,756,135 |   |

See accompanying            notes.

1

----

**SkyTerra            Communications, Inc.**

**Condensed            Consolidated Balance Sheets            (in thousands, except share and per share data)            (unaudited)**

|                                                                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|-----------|----------------------------------------------|--------|-----------|--------|
|                                                                                                                                                                                                                                                         |   | **March 31,                        2008** |      | **December 31,                        2007** |   |
|                                                                                                                                                                                                                                                         |   |                                           |      |                                              |   |
|                                                                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
| **Assets**                                                                                                                                                                                                                                                   |   |                                      |      |                                         |   |      |   |
| Current                        assets:                                                                                                                                                                                                                       |   |                                      |      |                                         |   |      |   |
| Cash and cash                        equivalents                                                                                                                                                                                                             |   | $                                         | 93,050    |                                         | $      | 127,905   |   |
| Investments                                                                                                                                                                                                                                                  |   |                                      | 167,586   |                                         |   | 97,764    |   |
| Accounts receivable,                        net of allowance of $77 and $78, respectively                                                                                                                                                                    |   |                                      | 6,544     |                                         |   | 4,840     |   |
| Inventory                                                                                                                                                                                                                                                    |   |                                      | 1,830     |                                         |   | 2,531     |   |
| Other current                        assets                                                                                                                                                                                                                  |   |                                      | 4,929     |                                         |   | 3,928     |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total current                        assets                                                                                                                                                                                                                  |   |                                      | 273,939   |                                         |   | 236,968   |   |
| Property and equipment,                        net                                                                                                                                                                                                           |   |                                      | 508,113   |                                         |   | 417,052   |   |
| Intangible assets,                        net                                                                                                                                                                                                                |   |                                      | 531,631   |                                         |   | 539,057   |   |
| Goodwill                                                                                                                                                                                                                                                     |   |                                      | 12,015    |                                         |   | 12,435    |   |
| Investment in TerreStar                        Networks                                                                                                                                                                                                      |   |                                      | 69,747    |                                         |   | 78,100    |   |
| Other assets                                                                                                                                                                                                                                                 |   |                                      | 11,035    |                                         |   | 11,423    |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total assets                                                                                                                                                                                                                                                 |   | $                                         | 1,406,480 |                                         | $      | 1,295,035 |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
|                                                                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
| **Liabilities and                        stockholders’ equity**                                                                                                                                                                                        |   |                                      |      |                                         |   |      |   |
| Current                        liabilities:                                                                                                                                                                                                                  |   |                                      |      |                                         |   |      |   |
| Notes payable, current                        portion                                                                                                                                                                                                        |   | $                                         | 16,069    |                                         | $      | 15,745    |   |
| Accured interest on                        senior unsecured notes                                                                                                                                                                                            |   |                                      | 5,775     |                                         |   | —   |   |
| Accounts                        payable                                                                                                                                                                                                                      |   |                                      | 3,068     |                                         |   | 4,189     |   |
| Accrued                        expenses                                                                                                                                                                                                                      |   |                                      | 20,194    |                                         |   | 48,185    |   |
| Deferred revenue,                        current portion                                                                                                                                                                                                     |   |                                      | 3,565     |                                         |   | 3,319     |   |
| Taxes                        payable                                                                                                                                                                                                                         |   |                                      | —   |                                         |   | 1,070     |   |
| Other current                        liabilities                                                                                                                                                                                                             |   |                                      | 193       |                                         |   | 190       |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total current                        liabilities                                                                                                                                                                                                             |   |                                      | 48,864    |                                         |   | 72,698    |   |
| Senior secured discount                        notes, net                                                                                                                                                                                                    |   |                                      | 571,882   |                                         |   | 552,719   |   |
| Senior unsecured notes,                        net                                                                                                                                                                                                           |   |                                      | 123,105   |                                         |   | —   |   |
| Notes payable, net of                        current portion                                                                                                                                                                                                 |   |                                      | 35,748    |                                         |   | 36,302    |   |
| Deferred revenue, net                        of current portion                                                                                                                                                                                              |   |                                      | 15,632    |                                         |   | 16,333    |   |
| Other long term                        liabilities                                                                                                                                                                                                           |   |                                      | 510       |                                         |   | 257       |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total                        liabilities                                                                                                                                                                                                                     |   |                                      | 795,741   |                                         |   | 678,309   |   |
|                                                                                                                                                                                                                                                              |        |                                           |           |                                              |        |           |        |
|                                                                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
| Commitments and                        contingencies                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
|                                                                                                                                                                                                                                                              |        |                                           |           |                                              |        |           |        |
|                                                                                                                                                                                                                                                         |   |                                      |      |                                         |   |      |   |
| Minority                        interest                                                                                                                                                                                                                     |   |                                      | 357       |                                         |   | 508       |   |
| Stockholders’                        equity:                                                                                                                                                                                                           |   |                                      |      |                                         |   |      |   |
| Common stock, $0.01 par                        value. Authorized 200,000,000 shares; 34,167,663 and 34,265,663 share                        issued and outstanding at March 31, 2008 and December 31, 2007,                        respectively.             |   |                                      | 342       |                                         |   | 343       |   |
| Non-voting common                        stock, $0.01 par value. Authorized 100,000,000 shares; 72,612,414 and                        72,614,414 shares issued and outstanding at March 31, 2008 and December 31,                        2007, respectively. |   |                                      | 726       |                                         |   | 726       |   |
| Additional paid-in                        capital                                                                                                                                                                                                            |   |                                      | 983,848   |                                         |   | 952,520   |   |
| Accumulated other                        comprehensive loss                                                                                                                                                                                                  |   |                                      | (1,808    | )                                            |   | (1,855    | )      |
| Accumulated                        deficit                                                                                                                                                                                                                   |   |                                      | (372,726  | )                                            |   | (335,516  | )      |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total                        stockholders’ equity                                                                                                                                                                                                      |   |                                      | 610,382   |                                         |   | 616,218   |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |
| Total liabilities and                        stockholders’ equity                                                                                                                                                                                      |   | $                                         | 1,406,480 |                                         | $      | 1,295,035 |   |
|                                                                                                                                                                                                                                                         |   |                                           |           |                                         |        |           |   |

See accompanying            notes.

2

----

**SkyTerra            Communications, Inc.**

**Condensed            Consolidated Statements of Stockholders’ Equity            (in thousands, except share and per share data)            (unaudited)**

|                                                                                                                      |   |                                    |       |                                    |   |                                                                         |   |                                                                                                                   |       |   |                                                 |        |   |       |    |   |   |    |   |   |     |   |   |    |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|--------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|------------|--------|------------------------------------------------------|-------------|--------|------------|---------|--------|--------|---------|--------|--------|----------|--------|--------|---------|--------|
|                                                                                                                      |   | **Voting**                              |       | **Non-Voting**                          |   |                                                                         |   | **Accumulated                        Other                        Comprehensive                        (Loss) Income** |       |   |                                                 |        |   |
|                                                                                                                      |   | **Common                        Stock** |       | **Common                        Stock** |   | **Additional                        Paid-in                        Capital** |   |                                                                                                                   |       |   | **Total                        Stockholders’** |        |
|                                                                                                                      |   |                                         |       |                                         |   |                                                                         |   | **Accumulated**                                                                                                        |       |   |
|                                                                                                                      |   | **Shares**                              |       | **Amount**                              |   | **Shares**                                                                   |   | **Amount**                                                                                                             |       |   |                                                 | **Deficit** |   | **Equity** |    |
|                                                                                                                      |   |                                         |       |                                         |   |                                                                              |   |                                                                                                                        |       |        |                                                 |             |   |            |    |        |   |
| Balance,                        December 31, 2007                                                                         |   |                                    | 34,265,663 |                                    | $      | 343                                                                          |   |                                                                                                                   | 72,614,414 |   | $                                                    | 726         |   | $          | 952,520 |   | $      | (1,855  | )      | $      | (335,516 | )      | $      | 616,218 |   |
| Issuance                        of warrants                                                                               |   |                                    | —    |                                    |   | —                                                                      |   |                                                                                                                   | —    |   |                                                 |        |   |       | 27,216  |   |   | — |   |   | —  |   |   | 27,216  |   |
| Equity-based                        compensation                                                                          |   |                                    | (100,000   | )                                       |   | (1                                                                           | )      |                                                                                                                   | —    |   |                                                 | —     |   |       | 4,047   |   |   | — |   |   | —  |   |   | 4,046   |   |
| Exercise                        of MSV unit options                                                                       |   |                                    | —    |                                    |   | —                                                                      |   |                                                                                                                   | —    |   |                                                 | —     |   |       | 65      |   |   | — |   |   | —  |   |   | 65      |   |
| Conversion                        of non-voting to voting common stock                                                    |   |                                    | 2,000      |                                    |   | —                                                                      |   |                                                                                                                   | (2,000     | )      |                                                 | —     |   |       | — |   |   | — |   |   | —  |   |   | — |   |
| Net                        loss                                                                                           |   |                                    | —    |                                    |   | —                                                                      |   |                                                                                                                   | —    |   |                                                 | —     |   |       | — |   |   | — |   |   | (37,210  | )      |   | (37,210 | )      |
| Foreign                        currency       translation                        adjustment |   |                                    | —    |                                    |   | —                                                                      |   |                                                                                                                   | —    |   |                                                 | —     |   |       | — |   |   | 47      |   |   | —  |   |   | 47      |   |
|                                                                                                                      |   |                                         |            |                                    |        |                                                                              |   |                                                                                                                        |            |   |                                                      |             |   |            |         |   |        |         |   |        |          |   |        |         |   |
| Balance,                        March 31, 2008                                                                            |   |                                    | 34,167,663 |                                    | $      | 342                                                                          |   |                                                                                                                   | 72,612,414 |   | $                                                    | 726         |   | $          | 983,848 |   | $      | (1,808  | )      | $      | (372,726 | )      | $      | 610,382 |   |
|                                                                                                                      |   |                                         |            |                                    |        |                                                                              |   |                                                                                                                        |            |   |                                                      |             |   |            |         |   |        |         |   |        |          |   |        |         |   |

See accompanying            notes.

3

----

**SkyTerra            Communications, Inc.**

**Condensed            Consolidated Statements of Cash Flows            (in thousands)            (unaudited)**

|                                                                                               |   |                                                                           |     |     |   |    |   |
|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|----------|----------|--------|---------|--------|
|                                                                                               |   | **Three Months                        Ended                        March 31,** |     |
|                                                                                               |   |                                                                                |     |
|                                                                                               |   | **2008**                                                                       |     | **2007** |   |
|                                                                                               |   |                                                                                |     |          |   |
| **Operating                        activities**                                                    |   |                                                                           |     |     |   |    |   |
| Net loss                                                                                           |   | $                                                                              | (37,210  | )        | $      | (19,817 | )      |
| Adjustments to                        reconcile net loss to net cash used in operating activities: |   |                                                                           |     |     |   |    |   |
| Non-cash and working                        capital items                                          |   |                                                                           | 23,402   |     |   | 13,705  |   |
|                                                                                               |   |                                                                                |          |          |        |         |        |
| Net cash used in                        operating activities                                       |   |                                                                           | (13,808  | )        |   | (6,112  | )      |
|                                                                                               |   |                                                                           |     |     |   |    |   |
| **Investing                        activities**                                                    |   |                                                                           |     |     |   |    |   |
| Purchase of property                        and equipment                                          |   |                                                                           | (76,347  | )        |   | (62,142 | )      |
| Change in restricted                        cash                                                   |   |                                                                           | (12      | )        |   | 18      |   |
| Purchase of                        investments                                                     |   |                                                                           | (134,239 | )        |   | (92,584 | )      |
| Maturity of                        investments                                                     |   |                                                                           | 65,065   |     |   | 78,998  |   |
| Cash acquired and                        used related to BCE Exchange Transaction                  |   |                                                                           | (25,269  | )        |   | 37,000  |   |
|                                                                                               |   |                                                                                |          |          |        |         |        |
| Net cash used in                        investing activities                                       |   |                                                                           | (170,802 | )        |   | (38,710 | )      |
|                                                                                               |   |                                                                           |     |     |   |    |   |
| **Financing                        activities**                                                    |   |                                                                           |     |     |   |    |   |
| Proceeds from                        issuance of senior unsecured notes and warrants               |   |                                                                           | 150,000  |     |   | — |   |
| Principal payments                        on notes payable                                         |   |                                                                           | (230     | )        |   | (60     | )      |
| Proceeds from                        exercise of stock options                                     |   |                                                                           | —  |     |   | 562     |   |
| Proceeds from                        exercise of MSV unit options                                  |   |                                                                           | 65       |     |   | 564     |   |
|                                                                                               |   |                                                                                |          |          |        |         |        |
| Net cash provided by                        financing activities                                   |   |                                                                           | 149,835  |     |   | 1,066   |   |
|                                                                                               |   |                                                                           |     |     |   |    |   |
| Effect of exchange                        rates on cash and cash equivalents                       |   |                                                                           | (80      | )        |   | 65      |   |
|                                                                                               |   |                                                                           |     |     |   |    |   |
| Net change in cash                        and cash equivalents                                     |   |                                                                           | (34,855  | )        |   | (43,691 | )      |
| Cash and cash                        equivalents, beginning of period                              |   |                                                                           | 127,905  |     |   | 195,017 |   |
|                                                                                               |   |                                                                                |          |          |        |         |        |
| Cash and cash                        equivalents, end of period                                    |   | $                                                                              | 93,050   |     | $      | 151,326 |   |
|                                                                                               |   |                                                                                |          |          |        |         |        |

See accompanying            notes.

4

----

**SkyTerra            Communications, Inc.**

**Notes to            Condensed Consolidated Financial Statements            (unaudited)**

**1. Organization and Basis of            Presentation**

          All            SkyTerra Communications, Inc. (SkyTerra or the Company) operating and development            activity is performed through its 99.3% owned consolidated subsidiary Mobile Satellite            Ventures LP (MSV). The Company currently offers a range of mobile satellite services            using two geostationary satellites that support the delivery of data, voice, fax and            dispatch radio services. The Company is developing an integrated satellite and            terrestrial communications network to provide ubiquitous wireless broadband services,            including Internet access and voice services, in the United States and Canada. The            Company plans to launch two new satellites that will serve as the core of this next            generation network. These new satellites, MSV-1 and MSV-2, are planned for launch in            September 2009 and July 2010, respectively. MSV is licensed by the United States and            Canadian governments to operate its current and next generation systems in the L-band            spectrum which MSV, along with Mobile Satellite Ventures (Canada) Inc. (MSV Canada), a            consolidated variable interest entity, have coordinated for their use. MSV also holds            an ancillary terrestrial component (ATC) authorization. The Company filed applications            to modify its ATC authorization in November 2005, which are still pending. MSV Canada            has also received authorization from Industry Canada to construct, launch, and operate            another North American satellite. Pursuant to these satellite authorizations, MSV and            MSV Canada must meet certain satellite milestone requirements.

          The            Company’s operations are subject to significant risks and uncertainties,            including technological, competitive, financial, operational, and regulatory risks            associated with the wireless communications business. The Company will also require            substantial additional capital resources to construct its next generation integrated            network.

          The            Company believes that its existing cash resources will not be sufficient to satisfy            anticipated cash requirements for the next twelve months. The Company has significant            operating and contractual obligations. The Company’s current operating            assumptions and projections, which reflect management’s best estimate of future            revenue, operating expenses, and capital commitments, indicate that the Company’s            current sources of liquidity will be sufficient to fund operations through December 31,            2008, however, additional funding will be required in early 2009. The Company’s            ability to meet its projections, however, is subject to uncertainties, and there can be            no assurance that the Company’s current projections will be accurate.

          The            Company is actively pursuing means to extend its liquidity and raise capital. These            alternatives include the sale of the Company’s investment in TerreStar Networks            Inc. (TerreStar Networks), a capital infusion through an equity or debt investment with            a strategic partner, a capital infusion through the sale of additional debt or equity,            renegotiation of vendor cash payment schedules to delay payment into the future, or            some combination of these actions. While the Company is actively exploring these            alternatives, there can be no assurances that the Company will be able to complete a            transaction, or do so on terms that are favorable. Any deferrals or restructurings            could delay the Company’s satellite program or otherwise negatively affect the            Company’s ability to continue the development of the next generation network. If            the Company is not able to obtain additional funding, defer or otherwise restructure            significant contractual obligations, the Company may not be able to continue as a going            concern, and may be required to consider alternatives such as selling assets, ceasing            work on the next generation network, or restructuring debt obligations.

          The            accompanying unaudited condensed consolidated financial statements include the accounts            of the Company, MSV, all wholly owned subsidiaries of the Company and MSV, and all            variable interest entities for which the Company or MSV is the primary beneficiary. All            intercompany accounts are eliminated upon consolidation. These unaudited condensed            financial statements have been prepared by the Company in accordance with accounting            principles generally accepted in the United States (GAAP) for interim financial            information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In            the opinion of management, the accompanying condensed consolidated financial statements            contain adjustments consisting only of those of a normal recurring nature, necessary            for a fair presentation of the Company’s financial position, results of            operations and cash flows at the dates and for the periods indicated. While the Company            believes that the disclosures presented are adequate to make the information not            misleading, these condensed consolidated financial statements should be read in            conjunction with the Company’s financial statements and related notes for the            year ended December 31, 2007.

          On            January 5, 2007, the Company acquired additional equity interests in MSV from BCE            Inc. (BCE) (the BCE Exchange Transaction). On February 12, 2007 and            November 30, 2007 the Company acquired additional equity interests in MSV from            TerreStar Corporation. These transactions were accounted for under the purchase method            of accounting and are described more fully in the Company’s audited financial            statements for the year ended December 31, 2007. The following unaudited pro forma            information is presented as if the Company had completed all the above transactions as            of January 1, 2007. The pro forma information is not necessarily indicative of            what the results of operations would have been had the transactions taken place at such            date or of the future results of operations (in thousands except per share            information):

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results of operations would have            been had the transactions taken place at such date or of the future results of            operations (in thousands except per share information):

|                                                                                     |   |                                                    |    |   |   |
|------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|---------|--------|--------|
|                                                                                     |   | **Three months                        ended March 31,** |    |
|                                                                                     |   |                                                         |    |
|                                                                                     |   | **2007**                                                |    |
|                                                                                     |   |                                                         |    |
|                                                                                     |   |                                                    |    |   |   |
| Pro forma revenues,                        unaudited                                     |   | $                                                       | 8,102   |   |   |
| Pro forma                        depreciation, unaudited                                 |   |                                                    | 7,823   |   |   |
| Pro forma operating                        loss, unaudited                               |   |                                                    | (16,936 | )      |   |
| Pro forma net loss,                        unaudited                                     |   |                                                    | (23,031 | )      |   |
| Pro forma net loss                        per share – basic and diluted, unaudited |   | $                                                       | (0.22   | )      |   |

**2. Summary of Significant            Accounting Policies**

**Use of            Estimates**

          The            preparation of consolidated financial statements requires the use of estimates and            judgments that affect the reported amounts of assets, liabilities, equity, and            disclosure of contingencies and the reported amounts of revenues and expenses during            the reporting period. These estimates, particularly estimates relating to the valuation            of the investment in TerreStar Networks, valuation of intangible assets, valuation of            MSV limited partnership units, the useful lives of long-lived assets, and the valuation            of senior unsecured notes and warrants, among others, have a material impact on the            financial statements. Actual results and outcomes could differ from these estimates and            assumptions.

**Investments**

          Investments            include commercial paper, certificates of deposit, municipal bonds and securities            issued by government agencies. All of the Company’s investments are considered            held-to-maturity with original maturities of less than one year and are reported at            amortized cost. The classification of investments is determined at the time of purchase            and re-evaluated at each balance sheet date. Interest income is recognized when earned.            Realized gains and losses for marketable securities are derived using the specific            identification method.

          In            the event that the amortized cost of an investment exceeds its fair value, the Company            evaluates, among other factors, the duration and extent to which the fair value is less            than cost, the financial health and business outlook for the investee, and the            Company’s intent and ability to hold the investment. If a decline in fair value            is considered to be other-than-temporary, the cost basis of the individual security is            written down to fair value and the amount of the write-down is included in results of            operations.

**Fair Value            Measurements**

          In            September 2006, the Financial Accounting Standards Board (FASB) issued Statement of            Financial Accounting Standards (SFAS) No. 157, *Fair Value Measurements* (SFAS No.            157). SFAS No. 157 defines fair value, establishes a framework and gives guidance            regarding the methods used for measuring fair value, and expands disclosures about fair            value measurements. The Company adopted SFAS No. 157 effective January 1, 2008. In            February 2008, the FASB released FASB Staff Position, (FSP) SFAS            157-2—*Effective Date of FASB Statement No. 157*, which delays the effective            date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except            those that are recognized or disclosed at fair value in the financial statements on a            recurring basis (at least annually) to fiscal years beginning after November 15,            2008.

                      SFAS No. 157 clarifies that fair value is an exit price, representing the amount            that would be received to sell an asset or paid to transfer a liability in an orderly            transaction between market participants. As such, fair value is a market-based            measurement that should be determined based on assumptions that market participants            would use in pricing an asset or liability. As a basis for considering such            assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which            prioritizes the inputs used in measuring fair value as follows: Level 1 are observable            inputs such as quoted prices in active markets; Level 2 are inputs other than the            quoted prices in active markets that are observable either directly or indirectly; and            Level 3 are unobservable inputs in which there is little or no market data, which            require the Company to develop its own assumptions. This hierarchy requires the Company            to use observable market data, when available, and to minimize the use of unobservable            inputs when determining fair value. On a recurring basis, the Company measures certain            assets and liabilities at fair value, including certain of the Company’s money            market funds and foreign currency contracts. On a non-recurring basis, the Company            measures other assets and liabilities at fair value, including the investment in            TerreStar Networks, the senior unsecured notes, and the warrants associated with the            senior unsecured notes.

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                      The Company’s fair value measurements in connection with the Company’s            adoption of SFAS No. 157 were as follows (in thousands):

|                                                                       |        |        |        |         |         | Fair Value Measurements at Reporting                        Date using |         |         |        |
|-----------------------------------------------------------------------|--------|--------|--------|---------|---------|------------------------------------------------------------------------|---------|---------|--------|
||
| Assets:                                                               |   |   |   |    |    |                                                                   |    |    |   |   |   |   |   |   |   |   |   |
|    Cash                    equivalents                 |   |   | $      | 92,927  |    | $                                                                      | 92,927  |    | $      | — |   | $ | — |   | $ | — |   |
|    Investment                    in TerreStar Networks |   |   |   | 69,747  |    |                                                                   | — |    |   | 69,747 |   |   | — |   |   | (8,353 | ) |
|                                                                  |        |   |        |    |         |                                                                   |         |    |        |   |
|                                                                  |   |   |   | $       | 162,674 |                                                                   | $       | 92,927  |   | $ | 69,747 |   | $ | — |   | $ | (8,353 | ) |
|                                                                  |   |   |   |    |    |                                                                   |    |    |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                          |   |   |   |    |    |                                                                   |    |    |   |   |   |   |   |   |   |   |   |
|    Foreign                    currency contracts       |   |   | $      | 24      |    | $                                                                      | 24      |    | $      | — |   | $ | — |   | $ | (24 | ) |
|                                                                  |        |        |        |         |         |                                                                        |         |         |        |  |  |  |  |  |  |  |  |  |
|                                                                       |
|                                                                       |
| Liabilities:                                                          |   |   |   |    |    |                                                                   |    |    |   |   |   |   |   |   |   |   |  |
|    Senior unsecured                    notes           |   |   | $      | 127,500 |    | $                                                                      | — |    | $      | 127,500 |   | $ | — |   | $ | — |  |
|    Warrants                                            |   |   |   | 28,261  |    |                                                                   | — |    |   | 28,261 |   |   | — |   |   | — |  |
|                                                                       |        |        |        |         |         |                                                                        |         |         |        |  |
|                                                                  |   |   |   | $       | 155,761 |                                                                   | $       | — |   | $ | 155,761 |   | $ | — |   | $ | — |  |

          The            Company accounted for the issuance of the warrants, which were associated with the            senior unsecured notes, in accordance with Accounting Principles Board Opinion (APB)            No. 14, *Accounting for Convertible Debt and Debt Issued with Stock Purchase            Warrants,* whereby the Company separately measured the fair value of the senior            unsecured notes and the warrants and allocated the total proceeds of $150 million on a            pro-rata basis to each. Based on these fair value determinations the allocation of the            proceeds to the senior unsecured notes and warrants was $122.8 million and $27.2            million, respectively, on the date of close of January 7, 2008 (see Note 3).

**Investment in TerreStar            Networks**

          The            Company owns 11.1% of TerreStar Networks (a consolidated subsidiary of TerreStar            Corporation) that it accounts for under the cost method. The Company evaluates            impairment of such investments in accordance with Emerging Issues Task Force 03-01,            *The Meaning of Other-Than-Temporary Impairment and its Application to Certain            Investments*. Accordingly, the Company considers both triggering events and tangible            evidence that investments are recoverable within a reasonable period of time, as well            as its intent and ability to hold investments that may have become temporarily or            otherwise impaired.

          During            the three months ended March 31, 2008, the observable quoted market price of TerreStar            Corporation common stock continued to decrease. TerreStar Corporation owns two            principal assets: an ownership interest in TerreStar Networks, and shares of the            Company’s common stock. The estimated value of TerreStar Corporation’s            ownership interest in TerreStar Networks (and the value for 100% of TerreStar Networks)            can be derived by subtracting the public trading value of TerreStar Corporation’s            investment in the Company from the public trading value of TerreStar Corporation. The            decline in TerreStar Corporation’s stock price indicated that there may have been            a decline in the fair value of the Company’s investment in TerreStar            Networks.

          Upon            the adoption of SFAS No. 157, the Company evaluated the various methods under which it            had previously estimated the fair value of its investment in TerreStar Networks. Based            on this assessment, the Company determined that its market based valuation approach            (TerreStar Corporation Market Method) that utilizes observable quoted market inputs            (Level 1 inputs under SFAS No. 157) and observable other than quoted market inputs            (Level 2 inputs under SFAS No. 157), was at a higher level of the fair value hierarchy            than the other methods it had previously utilized. Accordingly, the Company used the            TerreStar Corporation Market Method to perform its assessment of impairment of the            investment in TerreStar Networks as of March 31, 2008.

          At            March 31, 2008, the investment in TerreStar Networks valued under the TerreStar            Corporation Market Method was $69.7 million. Based on this valuation, the Company            determined that the TerreStar Networks investment had become other than temporarily            impaired. The investment was written down to the $69.7 million value determined under            the TerreStar Corporation Market Method, resulting in a charge of $8.4 million during            the three months ended March 31, 2008. There is no assurance that the proceeds from the            ultimate disposition of this asset, if any, will be equal to or greater than the $69.7            million carrying amount recorded as of March 31, 2008.

          The            trading value of TerreStar Corporation common stock continued to decline subsequent to            March 31, 2008. The Company will evaluate the effect of the decline on the value of its            investment in TerreStar Networks to determine if such decline is other-than-temporary            in the second quarter of 2008.

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**Revenue            Recognition**

          The            Company generates revenue through the sale of the following satellite based services:            capacity, telephony, data, and dispatch. The Company also sells equipment for use by            end users. The Company recognizes revenue when services are performed or delivery has            occurred, evidence of an arrangement exists, the fee is fixed or determinable, and            collection is probable.

          Capacity            is the supply of bandwidth and power to customers who implement and operate their own            networks. Capacity revenue is recognized as the service is provided.

          Telephony            is the supply of voice service to end users. Telephony customers are acquired through            retail dealers or resellers. Retail dealers receive activation fees and earn            commissions on monthly end user access and usage revenues. Resellers are under            contractual arrangements with the Company for their purchase of monthly access and            usage, and they manage the arrangements with the end user. Telephony customers are            charged activation fees, fixed monthly access fees and variable usage charges,            generally charged by minute of usage, depending on voice plan chosen. Monthly network            access revenue is recognized in the month of service to the end-user. Variable usage            revenue is recognized during the period of end-user usage. Activation fees are deferred            and recognized ratably over the customer’s contractual service term, generally            one year.

          Data            service provides transmission in an “always-on” fashion. Common            applications for data customers include fleet and load management, credit card            verification, e-mail, vehicle position reporting, mobile computing, and data message            broadcasting. Customers are acquired through resellers. Resellers are under contractual            arrangements for their purchase of monthly access and usage from the Company, and            manage the arrangements with the end-user. Data service revenue is recognized in the            month of service.

          Dispatch            service provides the wide-area equivalent of “push-to-talk” two-way radio            service among users in customer defined groups. Dispatch service facilitates team-based            group operations and is highly suited for emergency communications. Customers are            acquired through dealers and resellers. Resellers are under contractual arrangements            for their purchase of monthly access from the Company, and manage the arrangements with            the end-user. Dispatch users pay a fixed monthly access fee for virtually unlimited            monthly usage; however, the fee varies with the coverage available. Dispatch service            revenue is recognized in the month of service.

          New            and existing subscribers to the Company’s network can purchase from the Company a            range of satellite handset configurations. Hardware generally includes handsets,            antennas, and cables, and can be purchased in “kits” that include the            hardware a customer would typically need to utilize the satellite services. Resellers            may purchase equipment in advance for purposes of resale to their end-users. Equipment            generally does not carry a right of return, and revenue is recognized upon transfer of            title, which occurs at the time of shipment to the customer.

**Capitalized            Interest**

                      Interest associated with the construction of the Company’s next generation            satellites, launch rockets, and ground stations has been capitalized. Total and            capitalized interest are as follows (in thousands):

|                                        |   |                                                                           |   |     |   |   |   |
|---------------------------------------------|--------|--------------------------------------------------------------------------------|--------|----------|--------|--------|--------|
|                                        |   | **Three months                        ended                        March 31,** |   |
|                                        |   | **2008**                                                                       |   | **2007** |   |
|                                        |   |                                                                                |   |          |   |
| Capitalized                        interest |   | $                                                                              | 14,070 |     | $      | 4,192  |   |
| Interest                        expense     |   |                                                                           | 11,716 |     |   | 12,129 |   |
|                                        |   |                                                                                |        |     |        |        |   |
| Total                        interest       |   | $                                                                              | 25,786 |     | $      | 16,321 |   |
|                                        |   |                                                                                |        |     |        |        |   |

**Income Taxes**

          Income            taxes are accounted for under the asset and liability method. Deferred tax assets and            liabilities are recognized for the future tax consequences attributable to differences            between the financial statement carrying amounts of existing assets and liabilities and            their respective tax bases and for operating loss and tax credit carry forwards.            Deferred tax assets and liabilities are measured using enacted tax rates expected to            apply to taxable income in the year in which those temporary differences are expected            to be recovered or settled. The effect on deferred tax assets and liabilities of a            change in tax rates is recognized in income in the period that includes the enactment            date. Valuation allowances are recorded against deferred tax assets when it is more            likely than not that some portion or all of a deferred tax asset will not be realized.            The ultimate realization of deferred tax assets is dependent upon the generation of            future taxable income during the period in which those temporary differences become            deductible. Management considers the scheduled reversal of deferred tax liabilities,            projected future taxable income and tax planning in evaluating whether it is more            likely than not that deferred tax assets will be realized. A valuation allowance has            been recorded against substantially all of the Company’s deferred tax assets. The            Company has recorded a deferred tax asset for MSV Canada, which is expected to            carryback losses incurred in the current year to get a refund of taxes paid in prior            years.

          The            Company adopted the provisions of FASB Interpretation No. 48, *Accounting for            Uncertainty in Income Taxes* (FIN 48) on January 1, 2007. The adoption of FIN 48 did            not impact the Company’s financial position or results of operations. The Company            has concluded that there are no uncertain tax positions requiring recognition in its            consolidated financial statements for any period through March 31, 2008. The            Company’s policy is to recognize interest and penalties on income tax matters in            the income tax provision.

          The            Company or one of its subsidiaries files income tax returns in the U.S. federal            jurisdiction and in various states and in foreign jurisdictions, primarily Canada and            its provinces. Because the Company’s 2006 U.S. federal income tax return used net            operating loss carryforwards dating, in part, back to 1993, some elements of income tax            returns back to 1993 are subject to examination. The Company is currently under audit            for income taxes by the U.S. federal government and by one U.S. state.

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The Company does not expect the            results of those audits to have a material impact on the Company’s financial            position or results of operations.

**Other Comprehensive            Loss**

          Comprehensive            loss is the change in equity of a business enterprise during a period from transactions            and other events and circumstances from non-owner sources. For the three months ended            March 31, 2008 and 2007, comprehensive loss was $37.2 million and $19.3 million,            respectively. The difference between net loss and comprehensive loss is foreign            currency translation adjustments.

**Loss Per Common            Share**

          Basic            loss per common share is computed by dividing net loss attributable to the common            shareholders by the weighted average number of common shares outstanding for the            period, excluding unvested restricted stock. Diluted loss per common share reflects the            potential dilution for the exercise or conversion of securities into common stock. For            the three months ended March 31, 2008 and 2007, options, warrants, and unvested            restricted stock were excluded from the computation of diluted net loss per common            shares as the effect would have been anti-dilutive.

**Recent            Pronouncements**

          In            December 2007, the FASB issued Statement No. 141 (revised 2007), *Business            Combinations* (SFAS No. 141R). SFAS No. 141R establishes principles and requirements            for how an acquirer in a business combination (i) recognizes and measures in its            financial statements the identifiable assets acquired, the liabilities assumed, and any            non-controlling interest in the acquiree, (ii) recognizes and measures the goodwill            acquired in a business combination or a gain from a bargain purchase, and (iii)            determines what information to disclose to enable users of financial statements to            evaluate the nature and financial effects of the business combination. SFAS No. 141R            will be applied prospectively to business combinations that have an acquisition date on            or after January 1, 2009. The impact of SFAS No. 141R on the Company’s            consolidated financial statements will depend on the nature and size of acquisitions,            if any, subsequent to the effective date.

          In            March 2008, the FASB issued SFAS No. 161, *Disclosures about Derivative Instruments            and Hedging Activities* (SFAS No. 161). SFAS No. 161 amends SFAS No. 133 by            improving financial reporting about derivative instruments and hedging activities by            requiring enhanced disclosures to enable investors to better understand their effects            on an entity’s financial position, financial performance, and cash flows. The            provisions of SFAS No. 161 are effective for fiscal years beginning after November 15,            2008, and interim periods within those fiscal years. The Company is in the process of            evaluating the impact, if any, that SFAS No. 161 will have on its consolidated            financial statements.

**Reclassifications**

          Certain            prior-year amounts related to next generation expenditures have been reclassified            within operating expenses to conform to the current-year presentation.

**3. Debt**

          Debt            consisted of the following (in thousands):

|                                                      |   |                                      |    |                                         |   |    |   |
|-----------------------------------------------------------|--------|-------------------------------------------|---------|----------------------------------------------|--------|---------|--------|
|                                                      |   |                                      |    |                                         |   |    |   |
|                                                      |   | **March 31,                        2008** |    | **December 31,                        2007** |
|                                                      |   |                                           |    |                                              |   |
| Senior secured                        discount notes, net |   | $                                         | 571,882 |                                         | $      | 552,719 |   |
| Senior unsecured                        notes, net        |   |                                      | 123,105 |                                         |   | — |        |
| Notes payable -                        vendor             |   |                                      | 50,765  |                                         |   | 50,765  |   |
| Note                        payable                       |   |                                      | 894     |                                         |   | 1,058   |        |
| Note payable due to                        Telesat Canada |   |                                      | 158     |                                         |   | 224     |   |
|                                                      |   |                                           |         |                                         |        |         |   |
|                                                      |   |                                      | 746,804 |                                         |   | 604,766 |        |
| Less: Current                        portion              |   |                                      | (16,069 | )                                            |   | (15,745 | )      |
|                                                      |   |                                           |         |                                         |        |         |   |
| Total debt                                                |   | $                                         | 730,735 |                                         | $      | 589,021 |        |
|                                                      |   |                                           |         |                                         |        |         |   |

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*     Senior            Secured Discount Notes*

          In            March 2006, MSV issued Senior Secured Discount Notes in an aggregate principal amount            of $750.0 million at maturity, generating gross proceeds of $436.2 million. Interest on            the notes will accrete from the issue date at a rate of 14% per annum, until they reach            full principal amount at April 1, 2010. Following April 1, 2010, interest will be            payable semi-annually in arrears in cash at a rate of 14% per annum, with the first            such payment being due on October 1, 2010. The Senior Secured Discount Notes will            mature on April 1, 2013.

          The            Senior Secured Discount Notes are secured by substantially all of MSV’s assets.            Upon the occurrence of certain change of control events, each holder of Senior Secured            Discount Notes may require the Issuers to repurchase all or a portion of its Senior            Secured Discount Notes at a price of 101% of the accreted value, plus, after April 1,            2010, accrued interest. In April 2008, the beneficial owners of a majority in aggregate            principal amount at maturity of the Senior Secured Discount Notes irrevocably waived            compliance with any and all provisions of the Senior Secured Discount Notes that would,            but for such waivers, require the Issuers to offer to repurchase or to repurchase any            of the Senior Secured Discount Notes as the result of a change of control caused by the            acquisition of beneficial ownership of the voting or nonvoting common stock of SkyTerra            by Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special            Situations Fund L.P. (together Harbinger), Harbinger Capital Partners Fund I, L.P., or            any of their affiliates (see Note 9). Such waivers by their terms do not apply to any            change of control other than a change of control involving Harbinger or its            affiliates.

          The            terms of the Senior Secured Discount Notes require MSV to comply with certain covenants            that restrict some of the Company’s corporate activities, including MSV’s            ability to incur additional debt, pay dividends, create liens, make investments, sell            assets, make capital expenditures, repurchase equity or subordinated debt, and engage            in specified transactions with affiliates. MSV may incur indebtedness beyond the            specific baskets allowed under the Senior Secured Discount Notes, provided it maintains            a leverage ratio of 6.0 to 1.0. Noncompliance with any of the covenants without cure or            waiver would constitute an event of default under the Senior Secured Discount Notes. An            event of default resulting from a breach of a covenant may result, at the option of the            note holders, in an acceleration of the principal and interest outstanding. The Senior            Secured Discount Notes also contain other customary events of default (subject to            specified grace periods), including defaults based on events of bankruptcy and            insolvency, and nonpayment of principal, interest or fees when due. MSV was in            compliance with the covenants of the Senior Secured Discount Notes as of March 31,            2008.

*     Senior            Unsecured Notes*

          On            December 15, 2007, the Company and MSV entered into a Securities Purchase Agreement            with Harbinger, pursuant to which Harbinger agreed to purchase $150 million of            MSV’s Senior Unsecured Notes due 2013 (the Senior Unsecured Notes) and ten year            warrants to purchase 9.1 million shares of the Company’s common stock, with an            exercise price of $10 per share. The transaction closed on January 7, 2008. The Senior            Unsecured Notes bear interest at a rate of 16.5%, payable in cash or in-kind, at            MSV’s option until December 15, 2011, and thereafter payable in cash. The Senior            Unsecured Notes mature on May 1, 2013.

          The            Company has accounted for the issuance of the warrants in accordance with Accounting            Principles Board Opinion (APB) No. 14, *Accounting for Convertible Debt and Debt            Issued with Stock Purchase Warrants,* whereby the Company separately measured the            fair value of the Senior Unsecured Notes and the warrants and allocated the total            proceeds of $150 million on a pro-rata basis to each. The proceeds allocated to the            warrants are credited to paid-in capital and the resulting discount from the face value            of the Senior Unsecured Notes is amortized using the effective interest rate method            over the term of the Senior Unsecured Notes. The fair value of the Senior Unsecured            Notes of $127.5 million was estimated based on then-current yields of comparable            securities (Level 2 inputs under SFAS No. 157). The fair value of the warrants of $28.3            million was estimated using the Black-Scholes option pricing model and the following            assumptions: expected volatility of 58.4%, term of 10 years, risk free interest rate of            4.2%, and no dividend yield. Based on these fair value determinations, the allocation            of the proceeds to the Senior Unsecured Notes and the warrants was $122.8 million and            $27.2 million, respectively.

          The            Securities Purchase Agreement grants to Harbinger the right of first negotiation to            discuss the issuance of additional equity securities by the Company in private            placement financing transactions. Should the Company and Harbinger not agree on the            terms for such a transaction, Harbinger has the right to maintain their percentage            ownership interest through pro rata

10

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purchases of shares of common            stock in issuances to third parties, subject to a number of exceptions. The Senior            Unsecured Notes have subsidiary guarantees and covenants similar to those contained in            the Senior Secured Discount Notes, with such modifications as appropriate to reflect            the financial terms of the Senior Unsecured Notes. The Securities Purchase Agreement            also contains more restrictive covenants regarding mergers, consolidation and transfer            of assets and restricted payments. The more restrictive covenants, the right of first            negotiation and the pre-emptive rights expire once Harbinger and their affiliates            beneficially own less than 5% of the outstanding common stock of the Company or, if            earlier, on December 31, 2011. The terms of the Senior Unsecured Notes require MSV to            comply with certain covenants that restrict some of MSV’s corporate activities,            including MSV’s ability to incur additional debt, pay dividends, create liens,            make investments, sell assets, make capital expenditures, repurchase equity or            subordinated debt, and engage in specified transactions with affiliates. Noncompliance            with any of the covenants without cure or waiver would constitute an event of default            under the Senior Unsecured Notes. An event of default resulting from a breach of a            covenant may result, at the option of the note holders, in an acceleration of the            principal and interest outstanding. The Senior Unsecured Notes also contain other            customary events of default (subject to specified grace periods), including defaults            based on events of bankruptcy and insolvency, and nonpayment of principal, interest or            fees when due. MSV was in compliance with the covenants of the Senior Unsecured Notes            as of March 31, 2008.

*     Notes            Payable – Vendor*

          MSV            has financed $50.8 million of satellite vendor payments with secured vendor notes            payable (Notes Payable – Vendor) that bear interest of LIBOR plus 400 basis            points combined with a 2% administrative fee. The Notes Payable – Vendor are            secured by the satellites. MSV is required to pay interest monthly on the amount            outstanding beginning the month subsequent to the utilization of the available credit.            All outstanding Notes Payable – Vendor must be repaid prior to satellite            delivery. MSV anticipates making payments of principal beginning in the fourth quarter            of 2008. MSV may prepay some or all of the Notes Payable – Vendor at anytime with            no penalties.

*     Note            Payable*

          In            June 2007, MSV entered into an agreement with a third party to finance the purchase of            software. Total payments under the agreement are $1.6 million, including all principal            and interest. The quarterly payments are fixed and are paid quarterly over the two year            term, ending in April, 2009. The imputed interest rate is 11%. The note is secured by            an interest in the related software license.

*     Note            Payable due to Telesat Canada*

          In            February 2003, MSV entered into an agreement with Telesat Canada (Telesat), a satellite            communications provider that is a related party (see Note 9) for the construction and            procurement of a ground station. Telesat Canada provided financing for this project            totaling $1.0 million at an interest rate of 9.5%.

          Remaining            future minimum principal payments as of March 31, 2008 related to the Company’s            debt agreements, described above, are as follows for the years ended December 31 (in            thousands):

|                                                                                |   |   |      |   |
|-------------------------------------------------------------------------------------|--------|--------|-----------|--------|
| 2008                                                                                |   | $      | 32,600    |   |
| 2009                                                                                |   |   | 79,495    |   |
| 2010                                                                                |   |   | 87,813    |   |
| 2011                                                                                |   |   | 146,380   |   |
| 2012                                                                                |   |   | 151,251   |   |
| Thereafter                                                                          |   |   | 968,045   |   |
|                                                                                |   |        |           |   |
| Total future                        principal payments                              |   |   | 1,465,584 |   |
| Less:                        interest                                               |   |   | (513,767  | )      |
|                                                                                |   |        |           |   |
| Principal                        portion                                            |   |   | 951,817   |   |
| Less: current                        portion                                        |   |   | (16,069   | )      |
| Less: accretion of                        interest on Senior Secured Discount Notes |   |   | (178,607  | )      |
| Less: accretion of                        discount on Senior Unsecured Notes        |   |   | (26,406   | )      |
|                                                                                |   |        |           |   |
| Total future                        principal payments                              |   |   | 730,735   |   |
|                                                                                |   |        |           |   |

11

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**4. Equity Based Compensation            Plans**

*MSV Unit Option Incentive            Plan*

          MSV            maintains a unit option incentive plan (MSV Unit Option Incentive Plan), which allows            for the granting of options and other unit based awards to employees and directors upon            approval by MSV’s Board of Directors. The fair value of each option is estimated            on the date of grant using the Black-Scholes option valuation model. The expected term            of option awards has been calculated as the midpoint between the vesting date and the            end of the contractual term of the option as historical data for MSV is not sufficient            for purposes of estimating the expected term of new grants. The risk-free rate was            based on U.S. Treasury yields for securities with similar terms. Volatility is            calculated based on the trading prices of SkyTerra common stock.

          The            fair value of Limited Investor Units underlying the equity-based awards is an input to            the determination of the fair value of equity-based awards. The Company utilized a            market approach to estimate the fair value of Limited Investor Units at each date on            which equity-based awards were granted, based on the observable trading stock price of            SkyTerra common stock, adjusted to account for differences in volatility and liquidity.            Beginning in 2008, MSV used a 2.82 exchange ratio between the observable market trading            price of SkyTerra and MSV, as further described below, to value a Limited Investor            Unit.

          Assumptions            used in determining the fair value of MSV unit options:

|                                         |   |                                                    |      |     |   |      |   |
|----------------------------------------------|--------|---------------------------------------------------------|-----------|----------|--------|-----------|--------|
|                                         |   | **Three months ended                        March 31,** |      |
|                                         |   |                                                         |      |
|                                         |   | **2008**                                                |      | **2007** |   |
|                                         |   |                                                         |      |          |   |
| Expected                        volatility   |   |                                                    | 60%       |     |   | 58%       |   |
| Expected term                        (years) |   |                                                    | 6         |     |   | 6         |   |
| Expected                        dividends    |   |                                                    | 0%        |     |   | 0%        |   |
| Risk free                        rate        |   |                                                    | 2.1%-3.3% |     |   | 5.2%-5.2% |   |

          The            Company recognizes compensation expense on a straight-line basis over the requisite            service period. The total equity-based compensation expense related to the MSV Unit            Option Incentive Plan recorded during the three months ended March 31, 2008 and 2007            was $2.8 million and $0.8 million, respectively. The total equity-based compensation            capitalized as system under construction related to the MSV Unit Option Incentive Plan            during the three months ended March 31, 2008 and 2007 was $0.4 million and $0.1            million, respectively. As of March 31, 2008, the total unrecognized compensation            related to MSV equity-based compensation was $6.6 million, which will be recognized            over a weighted-average period of 1.3 years.

*SkyTerra Equity-Based            Compensation Plans*

          SkyTerra            maintains a long-term incentive plan, a nonqualified stock option plan, and an equity            incentive plan, which allows for the granting of options and other equity-based awards.            As of March 31, 2008, the Company has outstanding awards of 750,000 restricted shares            of common stock to four executives. One-third of these awards will vest after three            years; another one-third will vest on the first day following the 20th consecutive            trading day on which the SkyTerra stock price exceeds $20 per share and the last third            will vest on the first day following the 20th consecutive trading day on which the            SkyTerra stock price exceeds $25 per share. The fair value of the restricted stock            grants containing market conditions and deemed service periods were estimated using a            Monte Carlo simulation model. The total equity-based compensation expense related to            the SkyTerra equity awards recognized during the three months ended March 31, 2008 and            2007 was $1.0 million and $1.2 million, respectively. As of March 31, 2008, the total            unrecognized compensation related to SkyTerra equity-based compensation is $3.8            million, which is expected to be recognized over a weighted-average period of 1.1            years.

          On            February 22, 2008 the Boards of Directors of the Company and MSV GP approved a            modification of certain outstanding options to purchase the Company’s common            stock and MSV’s Limited Investor Units, respectively, that decreased the exercise            prices of certain options to an exercise price equal to the current fair market value            of the underlying common stock and Limited Investor Units, respectively. As a result of            this modification the Company recorded $2.0 million of additional compensation expense            in the three months ended March 31, 2008, of which $1.9 million related to the            modification of options to purchase Limited Investor Units. This modification will            result in the recognition of additional compensation expense in future periods totaling            $1.3 million related to unvested options, of which $1.2 million relates to the            modification of options to purchase Limited Investor Units, and $0.1 million relates to            SkyTerra options.

12

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          On            March 14, 2008, the Company commenced an exchange offer (the Exchange Offer) to all            current MSV option holders to grant them new options under the Company’s Stock            Option Plan in exchange for surrender and termination of their MSV options. In            accordance with the terms of the Exchange Offer, all participating option holders would            receive options in the Company’s plan at a ratio of 2.82 SkyTerra options for            each MSV option terminated, with an exercise price equal to the exercise price of the            MSV options terminated divided by 2.82. Sale of all shares subject to the options            received upon exchange is subject to restrictions until May 1, 2010, subject to certain            exceptions described in the Exchange Offer which could result in earlier termination of            the restrictions. The Exchange Offer is scheduled to expire on May 16, 2008. While the            Company intends to complete the Exchange Offer, there is no guarantee that it will be            completed, and it is uncertain what percentage of the MSV option holders will elect to            participate and on what final terms the Exchange Offer will be completed.

**5. Commitments and            Contingencies**

***Leases***

          Office            facility leases may provide for escalations of rent or rent abatements and payment of            pro rata portions of building operating expenses. The Company records rent expense            using the straight-line method over the term of the lease agreement. MSV has            non-cancelable operating leases that expire starting in December 2008.

***Boeing            Contract***

          MSV            has a fixed price contract with Boeing Satellite Systems, Inc. (Boeing) for the            comprehensive design, development, construction, manufacturing, testing, and            installation of a space-based network, providing satellite launch support and other            services related to mission operations and system training. Under the terms of the            contract, the Company will purchase up to three satellites with an option for one            additional satellite that must be exercised no later than July 1, 2008. Each            satellite is contracted to have a mission life of 15 years with performance incentives            to be paid, if earned, during the expected 15-year operating life. Boeing has a first            lien on each satellite and related work until title and risk of loss transfers to the            Company upon launch. In September 2006, MSV deferred construction of a South American            satellite (MSV-SA). The MSV option to restart construction expires            November 8, 2008. MSV currently does not have plans to construct MSV-SA, and as            such, no amounts for this satellite are included in the Company’s future            commitments table. If the Company’s plans were to change and the Company            elected to proceed with MSV-SA construction, the Company would likely incur additional            expenditures in excess of $500 million to construct, launch, and insure the            satellite.

          If            MSV were to elect to terminate the Boeing contract in whole, the Company will be            subject to termination liability charges that would range from $185 million to $215            million, declining in mid 2008, which would be expensed when incurred. Similarly,            partial termination would range from $93 million to $117 million. Future minimum            contractual payments exclude all potential performance incentives (which could total a            maximum of $96.7 million), interest payments on performance incentives and deferred            construction payments, options, and construction for MSV-SA.

***HNS            Contract***

          MSV            entered into an agreement with Hughes Network Systems, LLC (HNS), a related party of            the Apollo stockholders, which at the time owned a substantial percentage of the            Company’s outstanding voting common stock, to purchase four base transceiver            subsystems and air interface technology for a fixed price of $43.0 million. The            transceiver subsystems integrate the satellites into the next generation            network.

***Launch            Contracts***

          In            May 2007, MSV entered into fixed price contracts with ILS International Launch            Services, Inc. and Sea Launch Company, LLC to launch the next generation satellites.            MSV plans to launch its new satellite, MSV-1 in September 2009 and the identical            Canadian satellite, MSV-2 in July 2010. The aggregate base cost for these agreements is            $174.8 million. MSV may incur liquidated damages if the respective contracts are            terminated by the Company. If MSV were to terminate the contracts prior to September            2008, the maximum liquidated damages would be $8.9 million, in addition to amounts            already paid. If MSV were to terminate the contracts after September 2008 it would not            incur any liquidated damages. Through March 31, 2008, the Company has made payments            totaling $13.2 million related to these contracts.

***Inmarsat Cooperation            Agreement***

          To            further organize large blocks of contiguous spectrum for the use of MSV and its            potential future partners, in December 2007, SkyTerra, MSV and MSV Canada (together the            MSV Parties) and Inmarsat Global Limited (Inmarsat) entered into a Cooperation            Agreement relating to the use of L-band spectrum for both mobile satellite services and            ATC services in

13

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North America. The Cooperation            Agreement addresses a number of regulatory, technology and spectrum coordination            matters involving L-band spectrum.

          Upon            receipt of an investment of $100 million in MSV by a third party for general corporate            purposes and election by the MSV Parties to trigger certain provisions, the MSV Parties            will be able to expand its trials and deployments to a broadband ATC trial using wider            spectrum bandwidths, on a specific designation of combined Inmarsat and MSV spectrum in            a pre-agreed market. Simultaneously upon the election by the MSV Parties regarding such            an investment, the Company is required to issue to Inmarsat $31.3 million of the            Company’s common stock, valued in accordance with terms of the            agreement.

          Upon            the occurrence of certain events, including regulatory approvals and coordination among            other L-band operators, MSV and MSV Canada, would, over time, have the potential for            coordinated access for up to 2 x 23 MHz (including large blocks of contiguous channels)            through the following phases.

          Upon            the occurrence of certain events, until September 1, 2011, the MSV Parties have the            option (the Phase 1 Option), subject to certain conditions, to effect a transition to a            modified band plan within an 18 to 30 month period. Such transition will include            modification of certain of Inmarsat’s network and end user devises and a shift in            frequencies between the MSV Parties and Inmarsat which would lead to additional            spectrum contiguity and more relaxed operating rules for the Company. Over the            transition period, the MSV Parties will be required to make payments to Inmarsat of            $250 million in cash. Upon the commencement of Phase 1, the Company will issue to            Inmarsat a number of shares of the Company’s common stock having a value of $31.3            million, valued in accordance with terms of the agreement. Upon the completion of the            transition of the spectrum in Phase 1, the Company will issue to Inmarsat a number of            shares of the Company’s common stock having a value of $56.3 million based on the            average closing price of the Company’s common stock for the prior forty five            (45)-trading day period. In addition, the MSV Parties have the option to accelerate the            transition time by accelerating payment to Inmarsat of $50 million that would be            credited towards the $250 million in cash payments.

          Subsequent            to the exercise of the Phase 1 Option, between January 1, 2010 and January 1, 2013, the            MSV Parties have the option (the Phase 2 Option) for Inmarsat to modify its North            American operations in a manner that will make additional spectrum available for ATC at            a cost to the Company of $115 million per year, resulting in substantially more            spectrum to the MSV Parties available for MSS/ATC. If the MSV Parties do not exercise            the Phase 2 Option, then between January 1, 2013 and January 1, 2015, Inmarsat would            have the option to require the MSV Parties to exercise the equivalent of the Phase 2            Option upon the same terms.                      In consideration for the            operational transition of spectrum to one or more of the band plans described above,            the MSV Parties have agreed to allow Inmarsat continued use of loaned spectrum under            dispute (subject to a potential dispute resolution process) and an additional loan of a            lesser amount of spectrum.

          A            substantial number of provisions in the Cooperation Agreement are subject to receipt of            applicable regulatory approvals. On March 26, 2008, the Administrations of Canada, the            United Kingdom, and the United States of America exchanged letters accepting in part            the Cooperation Agreement and effectively coordinating the current and next-generation            satellite networks of the MSV Parties and Inmarsat, as among those parties, and have            notified the ITU accordingly. Additional approvals are required, however, before            coordination of the satellite networks, under all phases specified in the Cooperation            Agreement, will be complete. There can be no assurance that such approvals or other            necessary approvals will be received, or that the conditions necessary for the            operation of certain other provisions of the Cooperation Agreement will be            met.

          During            the three months ended March 31, 2008, no spectrum arrangements were altered between            the MSV Parties and Inmarsat and no cash or consideration has been            exchanged.

***Other            Agreements***

          In            September 2006, a minority stakeholder in SkyTerra’s MSV Investors, LLC            subsidiary distributed to its shareholders all of its assets other than its interest in            MSV Investors. Such shareholders indemnified the Company for any taxes imposed on the            minority stakeholder for any taxable period or portion thereof ending on or prior to            September 26, 2006, including all liabilities for taxes relating to the distribution of            its assets as described above. On September 26, 2006, such shareholders paid the            Company $7.5 million of cash to pay such taxes. To the extent that the tax liability is            less than $7.5 million, the Company will refund the difference. If the former            shareholders are unable to pay taxes that exceed the $7.5 million, the Company will be            required to make such payments. As of March 31, 2008 the remaining cash and liability            related to this arrangement was $1.5 million and is included in accrued expenses in the            accompanying condensed consolidated balance sheet.

          Prior            to the closing of the BCE Exchange Transaction, TMI Delaware distributed to BCE and its            affiliates all of the assets of TMI Delaware other than its limited partnership            interests in MSV and its common stock of MSV GP. Under the terms of the exchange            agreement between

14

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the Company and BCE, BCE has            indemnified the Company for any taxes imposed on TMI Delaware for any taxable period or            portion thereof ending on or prior to the closing of the BCE Exchange Transaction,            including all liabilities for taxes relating to the distribution of its assets. At            closing, BCE transferred $37.0 million of cash to TMI Delaware that the Company will            use to pay such taxes. To the extent that the tax liability is less than $37.0 million,            the Company will refund to BCE the difference. During the three months ended March 31,            2008, the Company made payments of $25.3 million related to this liability. As of March            31, 2008 the remaining cash and liability related to this arrangement was $11.7 million            and is included in accrued expenses in the accompanying condensed consolidated balance            sheet.

          In            March 2008, MSV entered into an agreement with Telesat Canada for joint operational            services for the MSV-1 and MSV-2 satellites including the development of software for            operation and control of the satellites, and the provision of telemetry, tracking and            control services for the new MSV spacecrafts once they are in their designated orbital            positions.  Telesat Canada will provide these operational services through 2025            assuming the satellites reach their full mission life. MSV is entitled to delay the            start of services under the agreement for up to one year due to launch delays without            any impact to pricing. The Company also has a contract with Telesat Canada for the            provision of telemetry, tracking and control services to the Company for its existing            satellites. Future minimum payments related to these agreements, reflected in the table            below as satellite operational services, assume MSV-1 and MSV-2 will reach their full            mission life.

          Future            minimum payments related to the Company’s commitments are as follows as of            March 31, 2008 for the years ending December 31 (in thousands):

|       |   |       |    |                                  |   |    |   |                                       |    |                                                                             |   |      |   |      |   |   |   |   |   |   |    |   |
|------------|--------|------------|---------|---------------------------------------|--------|---------|--------|--------------------------------------------|---------|----------------------------------------------------------------------------------|--------|-----------|--------|-----------|--------|--------|--------|--------|--------|--------|---------|--------|
|       |   | **Leases** |    | **Boeing                        (a)** |   | **HNS** |   | **Launch                        Services** |    | **Satellite                        Operational                        Services** |   | **Other** |   | **Total** |   |
|       |   |            |    |                                       |   |         |   |                                            |    |                                                                                  |   |           |   |           |   |
| 2008       |   | $          | 1,933   |                                  | $      | 108,029 |   | $                                          | 13,227  |                                                                             | $      | 24,660    |   | $         | 2,276  |   | $      | 5,257  |   | $      | 155,382 |   |
| 2009       |   |       | 2,008   |                                  |   | 103,759 |   |                                       | 10,946  |                                                                             |   | 98,316    |   |      | 2,884  |   |   | 3,924  |   |   | 221,837 |   |
| 2010       |   |       | 1,882   |                                  |   | 4,550   |   |                                       | — |                                                                             |   | 38,589    |   |      | 1,884  |   |   | 300    |   |   | 47,205  |   |
| 2011       |   |       | 298     |                                  |   | — |   |                                       | — |                                                                             |   | —   |   |      | 1,434  |   |   | 158    |   |   | 1,890   |   |
| 2012       |   |       | — |                                  |   | — |   |                                       | — |                                                                             |   | —   |   |      | 1,434  |   |   | 158    |   |   | 1,592   |   |
| Thereafter |   |       | — |                                  |   | — |   |                                       | — |                                                                             |   | —   |   |      | 17,447 |   |   | 1,895  |   |   | 19,342  |   |
|       |   |            |         |                                  |        |         |   |                                            |         |                                                                             |        |           |   |           |        |   |        |        |   |        |         |   |
|       |   | $          | 6,121   |                                  | $      | 216,338 |   | $                                          | 24,173  |                                                                             | $      | 161,565   |   | $         | 27,359 |   | $      | 11,692 |   | $      | 447,248 |   |
|       |   |            |         |                                  |        |         |   |                                            |         |                                                                             |        |           |   |           |        |   |        |        |   |        |         |   |

|   |                                                                                                                                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |
| (a)    | Amounts exclude                        in-orbit incentives, associated interest and construction of MSV-SA. Also                        excludes payments to Boeing under vendor notes payable, as such amounts are                        included in the future payments related to debt. |

***Litigation and            Claims***

          The            Company is periodically a party to lawsuits and claims in the normal course of            business. While the outcome of the lawsuits and claims against the Company cannot be            predicted with certainty, management believes that the ultimate resolution of the            matters will not have a material adverse effect on the financial position or results of            operations of the Company.

***Contingencies***

          From            time to time, contingencies may arise in the ordinary course of business activities.            The Company recognizes a liability for contingencies when it is probable that future            expenditures will be made and expenditures can be reasonably estimated.

**6. Income            Taxes**

          SkyTerra            and its eligible subsidiaries file a consolidated United States federal income tax            return. As a limited partnership, MSV is not subject to income tax. SkyTerra is subject            to income tax based on its portion of MSV’s income or loss (99.3%). MSV’s            Canadian subsidiary and MSV Canada are taxed as corporations in Canada. The            Company’s income tax benefit or provision relates to MSV Canada.

          The            Company’s effective tax rate of (0.7)% and 0.0% for the three months ended March            31, 2008 and March 31, 2007, respectively, differs from the Federal statutory rate of            34.0%, due primarily to operating losses for which a full valuation allowance has been            recognized.

          As            of December 31, 2007, SkyTerra and the consolidated subsidiaries had unused net            operating loss (NOL) carryforwards of $112.7 million expiring from 2020 through 2027.            Utilization of U.S. NOL carryforwards may be subject to an annual limitation if the            Company experiences an ownership change as defined by Section 382 of the Internal            Revenue Code. On or about April 9, 2008, the Company is likely to have had such an            ownership change. The Company is in the process of evaluating whether or not a change            occurred. Due to the Company’s full valuation allowance on its U.S. NOL            carryforwards and other deferred tax assets, a limitation would not materially change            the Company’s net deferred tax assets. Despite NOL carryforwards, the Company may            have a future income tax liability due to alternative minimum tax or state or foreign            tax requirements.

15

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**7. Related Party            Transactions**

          Prior            to their spin-off in October 2007 by BCE (which holds a significant interest in the            Company), Telesat and Infosat Communications were related parties through common            ownership by BCE. Through common ownership by the Apollo Stockholders, the            Company’s related parties also included HNS and Hughes Telematics, Inc. In April            2008, Harbinger acquired substantially all of Apollo’s interests in the            Company.

          Through            common ownership by Harbinger, the Company’s related parties will include            Inmarsat, TerreStar Corporation and TerreStar Networks. The Company’s related            parties also include LCC International Inc., which is controlled by a former limited            partner and former member of MSV GP’s Board of Directors. Certain of MSV’s            intellectual property was acquired by assignment from entities controlled by such            limited partner. In certain circumstances where the Company may generate royalties from            licensing its ATC intellectual property to third parties, the Company may be required            to share a portion of such royalty payments with such limited partner and related            entities. The following table summarizes related party transactions (in            thousands):

|                                                              |   |                                                              |   |     |   |    |   |
|-------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|----------|--------|---------|--------|
|                                                              |   | **Three months ended                        March 31,** |   |
|                                                              |   |                                                                   |   |
|                                                              |   | **2008**                                                          |   | **2007** |   |
|                                                              |   |                                                                   |   |          |   |
| Income, including                        management fees          |   | $                                                                 | 174    |     | $      | 695     |   |
| Expenses                                                          |   |                                                              | 1,010  |     |   | 530     |   |
| Costs related to                        system under construction |   |                                                              | 6,515  |     |   | — |   |
| Due from related                        parties, as of            |   |                                                              | 217    |     |   | 391     |   |
| Due to related                        parties, as of              |   |                                                              | 31     |     |   | 330     |   |

**8. Segment            Information**

          Operating            segments are defined as components of an enterprise for which separate financial            information is available and is evaluated on a regular basis by the chief operating            decision makers in deciding how to allocate resources to an individual segment and in            assessing performance of the segment.

                      The Company has three reporting segments: MSV next generation, MSV MSS, and SkyTerra            corporate. The MSV next generation segment relates to activities to deploy a next            generation satellite system complemented by ATC. The MSV MSS segment relates to            MSV’s provision of mobile satellite services that support the delivery of data,            voice, fax and dispatch radio services using its existing in-orbit satellites. The            SkyTerra Corporate segment relates to activities related to the publicly traded holding            company. Substantially all of the Company’s recent capital expenditures relate to            MSV next generation. Management reviews the assets and financial position of MSV next            generation and MSV MSS on a combined basis as a significant portion of the            Company’s assets are shared between these segments. Assets are not segregated            between these segments, and management does not use asset information by these segments            to evaluate segment performance.

16

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          The            following tables present certain financial information on the Company’s            reportable segments for the three months ended March 31, 2008 and 2007 (in            thousands):

|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |    |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|--------|-----------------------------------------------|--------|------------------|--------|--------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                |   | **Three months ended March 31, 2008                        In Thousands** |    |
|                                                                                                |   |                                                                      |
|                                                                                                |   | **MSV Next                        Generation**                            |    | **MSV                        MSS** |   | **Total                        MSV** |   |   | **SkyTerra                        Corporate** |   | **Eliminations** |   | **SkyTerra                        Consolidated** |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |
| Revenues:                                                                                           |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |
| Services and related revenues                                                                       |   | $                                                                         | — |                               | $      | 7,115                                |   | $      | 7,115                                         |   |             | $      | —                                          |   | $      | — |   | $      | 7,115   |   |
| Equipment sales                                                                                     |   |                                                                      | — |                               |   | 1,222                                |   |   | 1,222                                         |   |             |   | —                                          |   |   | — |   |   | 1,222   |   |
| Other revenues                                                                                      |   |                                                                      | — |                               |   | 256                                  |   |   | 256                                           |   |             |   | —                                          |   |   | — |   |   | 256     |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Total revenues                                                                                      |   |                                                                      | — |                               |   | 8,593                                |   |   | 8,593                                         |   |             |   | —                                          |   |   | — |   |   | 8,593   |   |
| Operating expenses:                                                                                 |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |    |   |
| Cost of equipment sold                                                                              |   |                                                                      | — |                               |   | 974                                  |   |   | 974                                           |   |             |   | —                                          |   |   | — |   |   | 974     |   |
| Operations and cost of services (exclusive of depreciation                        and amortization) |   |                                                                      | 2,600   |                               |   | 4,063                                |   |   | 6,663                                         |   |             |   | —                                          |   |   | — |   |   | 6,663   |   |
| Sales and marketing                                                                                 |   |                                                                      | 1,555   |                               |   | 1,088                                |   |   | 2,643                                         |   |             |   | —                                          |   |   | — |   |   | 2,643   |   |
| Research and development (exclusive of depreciation and                        amortization)        |   |                                                                      | 4,107   |                               |   | —                              |   |   | 4,107                                         |   |             |   | —                                          |   |   | — |   |   | 4,107   |   |
| General and administrative                                                                          |   |                                                                      | 3,952   |                               |   | 2,207                                |   |   | 6,159                                         |   |             |   | 1,418                                            |   |   | — |   |   | 7,577   |   |
| Depreciation and amortization                                                                       |   |                                                                      | 7,439   |                               |   | 642                                  |   |   | 8,081                                         |   |             |   | —                                          |   |   | — |   |   | 8,081   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Total operating expenses                                                                            |   |                                                                      | 19,653  |                               |   | 8,974                                |   |   | 28,627                                        |   |             |   | 1,418                                            |   |   | — |   |   | 30,045  |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Operating loss                                                                                      |   | $                                                                         | (19,653 | )                                  | $      | (381                                 | )      | $      | (20,034                                       | )      |             | $      | (1,418                                           | )      | $      | — |   | $      | (21,452 | )      |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |

|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |    |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|--------|-----------------------------------------------|--------|------------------|--------|--------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                |   | **Three months ended March 31, 2007                        In Thousands** |    |
|                                                                                                |   |                                                                      |
|                                                                                                |   | **MSV Next                        Generation**                            |    | **MSV                        MSS** |   | **Total                        MSV** |   |   | **SkyTerra                        Corporate** |   | **Eliminations** |   | **SkyTerra                        Consolidated** |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |
| Revenues:                                                                                           |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |    |   |
| Services and related revenues                                                                       |   | $                                                                         | — |                               | $      | 6,694                                |   | $      | 6,694                                         |   |             | $      | —                                          |   | $      | — |   | $      | 6,694   |   |
| Equipment sales                                                                                     |   |                                                                      | — |                               |   | 1,186                                |   |   | 1,186                                         |   |             |   | —                                          |   |   | — |   |   | 1,186   |   |
| Other revenues                                                                                      |   |                                                                      | — |                               |   | 222                                  |   |   | 222                                           |   |             |   | —                                          |   |   | — |   |   | 222     |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Total revenues                                                                                      |   |                                                                      | — |                               |   | 8,102                                |   |   | 8,102                                         |   |             |   | —                                          |   |   | — |   |   | 8,102   |   |
| Operating expenses:                                                                                 |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |    |   |
| Cost of equipment sold                                                                              |   |                                                                      | — |                               |   | 981                                  |   |   | 981                                           |   |             |   | —                                          |   |   | — |   |   | 981     |   |
| Operations and cost of services (exclusive of depreciation                        and amortization) |   |                                                                      | 1,641   |                               |   | 3,812                                |   |   | 5,453                                         |   |             |   | —                                          |   |   | — |   |   | 5,453   |   |
| Sales and marketing                                                                                 |   |                                                                      | 346     |                               |   | 671                                  |   |   | 1,017                                         |   |             |   | —                                          |   |   | — |   |   | 1,017   |   |
| Research and development (exclusive of depreciation and                        amortization)        |   |                                                                      | 2,075   |                               |   | —                              |   |   | 2,075                                         |   |             |   | —                                          |   |   | — |   |   | 2,075   |   |
| General and administrative                                                                          |   |                                                                      | 3,690   |                               |   | 1,955                                |   |   | 5,645                                         |   |             |   | 2,044                                            |   |   | — |   |   | 7,689   |   |
| Depreciation and amortization                                                                       |   |                                                                      | 5,769   |                               |   | 578                                  |   |   | 6,347                                         |   |             |   | —                                          |   |   | — |   |   | 6,347   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Total operating expenses                                                                            |   |                                                                      | 13,521  |                               |   | 7,997                                |   |   | 21,518                                        |   |             |   | 2,044                                            |   |   | — |   |   | 23,562  |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |
| Operating loss                                                                                      |   | $                                                                         | (13,521 | )                                  | $      | 105                                  |   | $      | (13,416                                       | )      |             | $      | (2,044                                           | )      | $      | — |   | $      | (15,460 | )      |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |   |                                          |   |             |   |                                             |   |   |    |   |   |

17

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          The            following tables present balance sheet information for the Company’s reportable            segments as of March 31, 2008 and December 31, 2007 (in thousands):

|                                                      |   |                                            |      |         |   |             |   |                                             |    |   |   |      |   |
|-----------------------------------------------------------|--------|-------------------------------------------------|-----------|--------------|--------|------------------|--------|--------------------------------------------------|---------|--------|--------|-----------|--------|
|                                                      |   | **As                        of March 31, 2008** |      |
|                                                      |   |                                                 |      |
|                                                      |   |                                            |      |
|                                                      |   | **Total                        MSV**            |      | **SkyTerra** |   | **Eliminations** |   | **SkyTerra                        Consolidated** |    |
|                                                      |   |                                                 |      |              |   |                  |   |                                                  |    |
| Total                        assets                       |   | $                                               | 1,326,343 |         | $      | 112,590          |   | $                                                | (32,453 | )      | $      | 1,406,480 |   |
| Senior secured                        discount notes, net |   |                                            | 571,882   |         |   | —          |   |                                             | — |   |   | 571,882   |   |
| Senior unsecured                        notes, net        |   |                                            | 123,105   |         |   | —          |   |                                             | — |   |   | 123,105   |   |
| Notes                        payable                      |   |                                            | 51,817    |         |   | 5,125            |   |                                             | (5,125  | )      |   | 51,817    |   |
| Total                        liabilities                  |   |                                            | 781,425   |         |   | 19,554           |   |                                             | (5,238  | )      |   | 795,741   |   |
| Total                        equity                       |   |                                            | 544,919   |         |   | 93,035           |   |                                             | (27,572 | )      |   | 610,382   |   |

|                                                      |   |                                               |      |         |   |             |   |                                             |    |   |   |      |   |
|-----------------------------------------------------------|--------|----------------------------------------------------|-----------|--------------|--------|------------------|--------|--------------------------------------------------|---------|--------|--------|-----------|--------|
|                                                      |   | **As                        of December 31, 2007** |      |
|                                                      |   |                                                    |      |
|                                                      |   |                                               |      |
|                                                      |   | **Total                        MSV**               |      | **SkyTerra** |   | **Eliminations** |   | **SkyTerra                        Consolidated** |    |
|                                                      |   |                                                    |      |              |   |                  |   |                                                  |    |
| Total                        assets                       |   | $                                                  | 1,180,248 |         | $      | 119,960          |   | $                                                | (5,173  | )      | $      | 1,295,035 |   |
| Senior secured                        discount notes, net |   |                                               | 552,719   |         |   | —          |   |                                             | — |   |   | 552,719   |   |
| Notes                        payable                      |   |                                               | 52,047    |         |   | 5,125            |   |                                             | (5,125  | )      |   | 52,047    |   |
| Total                        liabilities                  |   |                                               | 637,602   |         |   | 45,880           |   |                                             | (5,173  | )      |   | 678,309   |   |
| Total                        equity                       |   |                                               | 542,646   |         |   | 74,080           |   |                                             | (508    | )      |   | 616,218   |   |

**9. Subsequent            events**

          On            April 7, 2008, Harbinger and Apollo Investment Fund IV, L.P., Apollo Overseas Partners            IV, L.P., AIF IV/RRRR LLC, AP/RM Acquisition LLC and ST/RRRR LLC (collectively, the            Apollo Stockholders), entered into a Securities Purchase Agreement pursuant to which            Harbinger agreed to purchase from the Apollo Stockholders, for an aggregate purchase            price of approximately $164 million:

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | 10,224,532 shares of                        voting common stock of the Company,                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | • | 6,173,597 shares of                        non-voting common stock of the Company,                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | • | 234,633 Series 1-A                        Warrants of the Company (the Series 1-A Warrants) entitling the holders to                        purchase a maximum aggregate of 652,711 shares of Voting Common Stock of                        the Company at an exercise price of $20.39 per share, subject to                        adjustment, and,                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | • | 9,810,033 Series 2-A                        Warrants of the Company entitling the holders thereof to purchase a maximum                        aggregate of 2,560,182 shares of voting common stock of the Company at an                        exercise price of $25.85 per share, subject to adjustment (the Series 2-A                        Warrants and, together with the Series 1-A Warrants, the                        Warrants). |

          The            Purchase Price paid by Harbinger represents a price of $10.00 per share for each share            of voting common stock and non-voting common stock and $100,000 in the aggregate for            the Warrants. The transaction closed on April 9, 2008. Following the transaction,            Harbinger Capital Partners Master Fund I, Ltd. reported that it beneficially owned            47.5% of the outstanding shares of the Company’s voting common stock, and that            certain of its affiliates owned additional shares of the Company’s voting and            non-voting common stock.

18

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|                               |                                                                                                                                          |
|------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| **Item                        2.** | **Management’s                        Discussion and Analysis of Financial Condition and Results of                        Operations** |

*          The            following discussion contains forward-looking statements within the meaning of Section            27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of            1934 that involve risks and uncertainties, including statements regarding the            Company’s capital needs, business strategy, expectations and intentions. The            Company urges you to consider that statements that use the terms “believe,”            “do not believe,” “anticipate,” “expect,”            “plan,” “estimate,” “intend” and similar            expressions are intended to identify forward-looking statements. These statements            reflect the Company’s current views with respect to future events. Because the            Company’s business is subject to numerous risks, uncertainties and risk factors,            the Company’s actual results could differ materially from those anticipated in            the forward-looking statements, including those set forth below under this “Item            2. Management’s Discussion and Analysis of Financial Condition and Results of            Operations” and elsewhere in this report. Actual results will most likely differ            from those reflected in these statements, and the differences could be substantial. The            Company disclaims any obligation to publicly update these statements, or disclose any            difference between the Company’s actual results and those reflected in these            statements. The information constitutes forward-looking statements within the meaning            of the Private Securities Litigation Reform Act of 1995.*

**Overview**

                      The Company’s operating and development activity is performed through its 99.3%            owned consolidated subsidiary Mobile Satellite Ventures LP (MSV). The Company currently            offers a range of mobile satellite services (MSS) using two geostationary satellites            that support the delivery of data, voice, fax and dispatch radio services. MSV is            licensed by the United States and Canadian governments to operate its current and next            generation systems in the L-band spectrum which MSV, along with Mobile Satellite            Ventures (Canada) Inc. (MSV Canada), a consolidated variable interest entity, have            coordinated for their use. MSV also holds an ancillary terrestrial component (ATC)            authorization. The Company filed applications to modify its ATC authorization in            November 2005, which are still pending. MSV Canada has also received authorization from            Industry Canada to construct, launch, and operate its North American satellite.            Pursuant to these satellite authorizations, MSV and MSV Canada must meet certain            satellite milestone requirements. The Company’s spectrum footprint covers a total            population of nearly 330 million.

          The            Company is developing an integrated satellite and terrestrial communications network to            provide ubiquitous wireless broadband services, including Internet access and voice            services, in the United States and Canada. In operating its next generation integrated            satellite-terrestrial network, the Company plans to allocate the use of spectrum            between satellite and terrestrial service. Using an all-IP, open architecture, the            Company believes its network will provide significant advantages over existing wireless            networks. Such potential advantages include higher data speeds, lower costs per bit and            flexibility to support a range of custom IP applications and services. The Company was            the first MSS provider to receive a license to operate an ATC network from the FCC. The            ATC licenses permit the use of the Company’s L-band satellite frequencies, in a            complimentary tower based network, in the operation of an advanced, integrated network            capable of providing wireless broadband on a fixed, portable and fully mobile basis.            The Company plans to launch two new satellites that will serve as the core of its new            network. The launch of MSV-1 is planned for September 2009, and the launch of MSV-2 is            planned for July 2010.

                      The Company’s satellite development efforts are at a stage where delays against            construction plans can reasonably be expected to occur, generally as a result of delays            in the construction of satellite components and integration of those components into            the spacecrafts. In particular, delays experienced in the construction, integration,            and testing of the reflector component of the satellites could result in a delay of the            delivery of the satellites to the launch site, as compared to the Company’s            current expectations. Presently, such a delay is not anticipated to effect the launch            date of the satellites as some amount of flexibility is provided for in the            Company’s construction and launch plans. There are no assurances that additional            delays will not occur in this and other component construction, integration, and            testing. If additional delays were to occur, such delays could effect the planned            launch date of the first satellite. In the event of delays, certain liquidated damages            may become due from Boeing. However, such amounts may not be adequate to compensate the            Company for losses sustained by delays of satellite launch.

          There            are no assurances that additional delays will not occur in this and other component            construction, integration, and testing. If additional delays were to occur, such delays            could effect the planned launch date of the first satellite. In the event of delays,            certain liquidated damages may become due from Boeing. However, such amounts may not be            adequate to compensate the Company for losses sustained by delays of satellite            launch.

                      The Company currently expects to offer a range of three broad services on its next            generation network.  First, the Company will facilitate the transition of its            current customers to the next generation services platform and will continue to support            current generation communications ground segments and mobile data system network            terminals, which it expects will generate revenue through at least the end of            2011.  Second, the Company plans to provide bandwidth and power to customers of            the next generation system who will implement and operate their own networks, which it            expects will begin to generate revenue after the launch of the next generation            satellites, continuing until end of next generation system life.  Finally, the            Company plans to provide next generation wireless coverage that will be accessible on            conventional handsets that enable interoperable, feature-rich voice and high-speed data            services.  Based on the terrestrial chipset development and production schedule            required for such services, the Company does not currently expect to generate next            generation wireless coverage revenues until some time after the next generation            satellites have been launched and placed into service.

19

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          The            Company’s current business plan for the next generation network is a wholesale            model whereby the Company’s strategic partners and other wholesale customers can            use the network to provide differentiated broadband services to their subscribers. The            Company believes its planned open network, in contrast to legacy networks currently            operated by incumbent providers, will allow distribution and other strategic partners            to have open network access and create a wide variety of custom applications and            services for consumers. To address the opportunities and challenges inherent in the            development of the Company’s next generation network, the Company continues to            focus on certain initiatives related to:

|   |   |                                                                                                                                                                                                                                                                                                                                                     |                                                                              |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|   | • | Development and                        evaluation of funding alternatives, including:                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |
|   |   | o                                                                                                                                                                                                                                                                                                                                                        | Strategic                        partnerships                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |                                                                              |
|   |   | o                                                                                                                                                                                                                                                                                                                                                        | Additional vendor                        financing                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |                                                                              |
|   |   | o                                                                                                                                                                                                                                                                                                                                                        | Sale of the                        Company’s interest in TerreStar Networks |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |                                                                              |
|   |   | o                                                                                                                                                                                                                                                                                                                                                        | Debt or equity                        financing                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |                                                                              |
|   | • | Continued                        coordination with third party licensees of L-band spectrum to organize                        large blocks of contiguous spectrum for the use of MSV and its potential                        future partners.                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |
|   | • | Arrangement of                        technology and distribution partnerships for both the MSS and ATC                        components of the next generation network, perhaps resulting in decisions                        on air-interface technologies, satellite-interface technologies and                        terrestrial deployment plans. |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |
|   | • | Development of the                        infrastructure and technologies required to operate MSS services upon                        launch.                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                     |
|   | • | Monitoring of                        satellite construction by the Company’s satellite                        manufacturer.                                                                                                                                                                                                                        |

**Corporate            Activity**

*     MSV            Option Exchange Offer*

          On            March 14, 2008, the Company commenced an exchange offer (the Exchange Offer) to all            current MSV option holders to grant them new options under the Company’s Stock            Option Plan in exchange for surrender and termination of their MSV options. In            accordance with the terms of the Exchange Offer, all participating option holders would            receive options in the Company’s plan at a ratio of 2.82 SkyTerra options for            each MSV option terminated, with an exercise price equal to the exercise price of the            MSV options terminated divided by 2.82. Sale of all shares subject to the options            received upon exchange is subject to restrictions until May 1, 2010, subject to certain            exceptions described in the Exchange Offer which could result in earlier termination of            the restrictions. The Exchange Offer is scheduled to expire on May 16, 2008. While the            Company intends to complete the Exchange Offer, there is no guarantee that it will be            completed, and it is uncertain what the percentage of the MSV option holders that will            elect to participate and on what final terms the Exchange Offer will be            completed.

*     Option            Modification*

          On            February 22, 2008 the Boards of Directors of the Company and MSV approved a            modification of certain outstanding options to purchase the Company’s common            stock and MSV’s Limited Investor Units, respectively, to lower the exercise            prices of out-of-the-money unexercised options to an exercise price equal to the            current fair market value of the underlying common stock and Limited Investor Units,            respectively. As a result of this modification the Company recorded $1.9 million of            additional compensation expense in the three months ended March 31, 2008. This            modification will result in the recognition of additional compensation expense in            future periods totaling $1.3 million, related to unvested options.

*     Change            in Control of SkyTerra*

          On            April 7, 2008, Harbinger and Apollo Investment Fund IV, L.P., Apollo Overseas Partners            IV, L.P., AIF IV/RRRR LLC, AP/RM Acquisition LLC and ST/RRRR LLC (collectively, the            Apollo Stockholders), entered into a Securities Purchase Agreement pursuant to which            Harbinger agreed to purchase from the Apollo Stockholders, for an aggregate purchase            price of approximately $164 million:

|   |   |                                                                                                                                                           |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | 10,224,532 shares of                        voting common stock of the Company,                                                                                |
|   |   |                                                                                                                                                           |
|   | • | 6,173,597 shares of                        non-voting common stock of the Company,                                                                             |
|   |   |                                                                                                                                                           |
|   | • | 234,633 Series 1-A                        Warrants of the Company (the Series 1-A Warrants) entitling the holders to                        purchase a maximum |

20

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | aggregate of 652,711                        shares of Voting Common Stock of the Company at an exercise price of $20.39                        per share, subject to adjustment, and,                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | • | 9,810,033 Series 2-A                        Warrants of the Company entitling the holders thereof to purchase a maximum                        aggregate of 2,560,182 shares of voting common stock of the Company at an                        exercise price of $25.85 per share, subject to adjustment (the Series 2-A                        Warrants and, together with the Series 1-A Warrants, the                        Warrants). |

          The            Purchase Price paid by Harbinger represents a price of $10.00 per share for each share            of voting common Stock and non-voting common stock and $100,000 in the aggregate for            the Warrants. The transaction closed on April 9, 2008. Following the transaction,            Harbinger Capital Partners Master Fund I, Ltd. reported that it beneficially owned            47.5% of the outstanding shares of the Company’s voting common stock, and that            certain of its affiliates owned additional shares of the Company’s voting and            non-voting common stock.

**Critical Accounting            Policies**

          The            Company’s discussion and analysis of its financial condition and results of            operations are based upon the Company’s consolidated financial statements, which            have been prepared in accordance with accounting principles generally accepted in the            United States. The preparation of the Company’s consolidated financial statements            requires the Company to make estimates and judgments that affect the reported amounts            of assets, liabilities and equity and disclosure of contingent assets and liabilities            at the date of the financial statements and the reported amounts of revenues and            expenses during the reporting period. These estimates, particularly estimates relating            to the valuation of the Company’s investment in TerreStar Networks, valuation of            intangible assets, valuation of MSV limited partnership units, the useful lives of            long-lived assets, the valuation of the Senior Unsecured Notes and warrants, and            judgments involved in evaluating impairment, among others, have a material impact on            the Company’s financial statements. Actual results and outcomes could differ from            these estimates and assumptions.

                      For a more detailed explanation of the judgments made in these areas and a discussion            of the Company’s accounting estimates and policies, refer to “Critical            Accounting Policies” included in Item 7 and “Summary of Significant            Accounting Policies” (Note 2) to the Company’s consolidated financial            statements beginning on page F-26 of the Annual Report on Form 10-K for the year ended            December 31, 2007.

*Fair Value            Inputs*

          The            Company adopted SFAS No. 157, *Fair Value Measurements*, as of January 1,            2008. See Note 2 to the Condensed Consolidated Financial Statements. Fair value is            a market-based measurement that should be determined based on assumptions that market            participants would use in pricing an asset or liability.

*Investment in TerreStar            Networks*

          The            Company owns 11.1% of TerreStar Networks (a consolidated subsidiary of TerreStar            Corporation) that it accounts for under the cost method. The Company evaluates            impairment of such investments in accordance with Emerging Issues Task Force 03-01,            *The Meaning of Other-Than-Temporary Impairment and its Application to Certain            Investments*. Accordingly, the Company considers both triggering events and tangible            evidence that investments are recoverable within a reasonable period of time, as well            as its intent and ability to hold investments that may have become temporarily or            otherwise impaired.

          During            the three months ended March 31, 2008, the observable quoted price of TerreStar            Corporation common stock continued to decrease. TerreStar Corporation owns two            principal assets: an ownership interest in TerreStar Networks, and shares of the            Company’s

21

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common stock. The estimated            value of TerreStar Corporation’s ownership interest in TerreStar Networks (and            the value for 100% of TerreStar Networks) can be derived by subtracting the public            trading value of TerreStar Corporation’s investment in the Company from the            public trading value of TerreStar Corporation. The decline in TerreStar            Corporation’s stock price indicated that there may have been a decline in the            fair value of the Company’s investment in TerreStar Networks.

          Upon            the adoption of SFAS No. 157, the Company evaluated the various methods under which it            had previously estimated the fair value of its investment in TerreStar Networks. Based            on this assessment, the Company determined that its market based valuation approach            (TerreStar Corporation Market Method) that utilizes observable quoted market inputs            (Level 1 inputs under SFAS No. 157) and observable other than quoted market inputs            (Level 2 inputs under SFAS No. 157), was at a higher level of the fair value hierarchy            than the other methods it had previously utilized. Accordingly, the Company used the            TerreStar Corporation Market Method to perform its assessment of impairment of the            investment in TerreStar Networks as of March 31, 2008.

          At            March 31, 2008, the investment in TerreStar Networks valued under the TerreStar            Corporation Market Method was $69.7 million. Based on this valuation, the Company            determined that the TerreStar Networks investment had become other than temporarily            impaired. The investment was written down to the $69.7 million value determined under            the TerreStar Corporation Market Method, resulting in a charge of $8.4 million during            the three months ended March 31, 2008. There is no assurance that the proceeds from the            ultimate disposition of this asset, if any, will be equal to or greater than the $69.7            million carrying amount recorded as of March 31, 2008.

          The            trading value of TerreStar Corporation common stock continued to decline subsequent to            March 31, 2008. The Company will evaluate the effect of the decline on the value of its            investment in TerreStar Networks to determine if such decline is other-than-temporary            in the second quarter of 2008.

**Current            Business**

          The            Company’s significant operating activity, providing mobile satellite            communication services, is performed through its consolidated subsidiary MSV. The            Company provides service in the United States and Canada using two nearly identical            satellites. End users of the Company’s mobile satellite services operate at sea,            on land and in the air, and customers use various services including satellite            bandwidth and power capacity, telephony, data, and dispatch services. The Company sells            equipment for use on the network.

22

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**Comparison of the three months ended March 31, 2008 and            2007**

The following tables detail the consolidated Company’s            financial results for the three months ended March 31, 2008 and March 31, 2007 in the            following segments: MSV Next Generation (research, development, and implementation of a            next generation network), MSV MSS (current satellite services), and SkyTerra corporate            activities.

|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|---------------|-----------------------------------------------|--------|-----------------|--------|--------------------------------------------------------------|--------|--------|---------|--------|---------------|---------|--------|--------|
|                                                                                                |   | **Three months ended March 31, 2008                        In Thousands** |    |                               |
|                                                                                                |   |                                                                      |    |                               |
|                                                                                                |   | ** MSV Next                         Generation**                |    | **MSV                        MSS** |   | **Total                        MSV** |   |          | **SkyTerra                        Corporate** |   | **Elimination** |   | ** SkyTerra                         Consolidated** |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |
| Revenues:                                                                                           |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Services and related revenues                                                                       |   |   $                                                             | — |                               | $      | 7,115                                |   |   $ | 7,115                                         |   |            | $      | —                                                      |   | $      | — |   |   $ | 7,115   |   |   |
| Equipment sales                                                                                     |   |                                                                      | — |                               |   | 1,222                                |   |          | 1,222                                         |   |            |   | —                                                      |   |   | — |   |          | 1,222   |   |   |
| Other revenues                                                                                      |   |                                                                      | — |                               |   | 256                                  |   |          | 256                                           |   |            |   | —                                                      |   |   | — |   |          | 256     |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Total                        revenues                                                               |   |                                                                      | — |                               |   | 8,593                                |   |          | 8,593                                         |   |            |   | —                                                      |   |   | — |   |          | 8,593   |   |   |
| Operating expenses:                                                                                 |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Cost of equipment sold                                                                              |   |                                                                      | — |                               |   | 974                                  |   |          | 974                                           |   |            |   | —                                                      |   |   | — |   |          | 974     |   |   |
| Operations and cost of services (exclusive of depreciation                        and amortization) |   |                                                                      | 2,600   |                               |   | 4,063                                |   |          | 6,663                                         |   |            |   | —                                                      |   |   | — |   |          | 6,663   |   |   |
| Sales and marketing                                                                                 |   |                                                                      | 1,555   |                               |   | 1,088                                |   |          | 2,643                                         |   |            |   | —                                                      |   |   | — |   |          | 2,643   |   |   |
| Research and development (exclusive of depreciation and                        amortization)        |   |                                                                      | 4,107   |                               |   | —                              |   |          | 4,107                                         |   |            |   | —                                                      |   |   | — |   |          | 4,107   |   |   |
| General and administrative                                                                          |   |                                                                      | 3,952   |                               |   | 2,207                                |   |          | 6,159                                         |   |            |   | 1,418                                                        |   |   | — |   |          | 7,577   |   |   |
| Depreciation and amortization                                                                       |   |                                                                      | 7,439   |                               |   | 642                                  |   |          | 8,081                                         |   |            |   | —                                                      |   |   | — |   |          | 8,081   |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Total                        operating expenses                                                     |   |                                                                      | 19,653  |                               |   | 8,974                                |   |          | 28,627                                        |   |            |   | 1,418                                                        |   |   | — |   |          | 30,045  |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Operating loss                                                                                      |   |                                                                      | (19,653 | )                                  |   | (381                                 | )      |          | (20,034                                       | )      |            |   | (1,418                                                       | )      |   | — |   |          | (21,452 | )      |   |
| Other income (expense):                                                                             |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Interest income                                                                                     |   |                                                                      | 2,925   |                               |   | —                              |   |          | 2,925                                         |   |            |   | 359                                                          |   |   | (63     | )      |          | 3,221   |   |   |
| Interest expense                                                                                    |   |                                                                      | (11,716 | )                                  |   | —                              |   |          | (11,716                                       | )      |            |   | (63                                                          | )      |   | 63      |   |          | (11,716 | )      |   |
| Impairment of investment in TerreStar Networks                                                      |   |                                                                      | — |                               |   | —                              |   |          | —                                       |   |            |   | (8,353                                                       | )      |   | — |   |          | (8,353  | )      |   |
| Other (expense) income, net                                                                         |   |                                                                      | 174     |                               |   | (14                                  | )      |          | 160                                           |   |            |   | 504                                                          |   |   | — |   |          | 664     |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Loss                        before provision for income taxes and minority interest                 |   |                                                                      | (28,270 | )                                  |   | (395                                 | )      |          | (28,665                                       | )      |            |   | (8,971                                                       | )      |   | — |   |          | (37,636 | )      |   |
| Benefit                        (provision) for income taxes                                         |   |                                                                      | — |                               |   | 275                                  |   |          | 275                                           |   |            |   | —                                                      |   |   | — |   |          | 275     |   |   |
| Minority interest                                                                                   |   |                                                                      | — |                               |   | —                              |   |          | —                                       |   |            |   | —                                                      |   |   | 151     |   |          | 151     |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Net                        loss                                                                     |   |   $                                                             | (28,270 | )                                  | $      | (120                                 | )      |   $ | (28,390                                       | )      |            | $      | (8,971                                                       | )      | $      | 151     |   |   $ | (37,210 | )      |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |

|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|---------------|-----------------------------------------------|--------|-----------------|--------|--------------------------------------------------------------|--------|--------|---------|--------|---------------|---------|--------|--------|
|                                                                                                |   | **Three months ended March 31, 2007                        In Thousands** |    |                               |
|                                                                                                |   |                                                                      |    |                               |
|                                                                                                |   | ** MSV Next                         Generation**                |    | **MSV                        MSS** |   | **Total                        MSV** |   |          | **SkyTerra                        Corporate** |   | **Elimination** |   | ** SkyTerra                         Consolidated** |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |
| Revenues:                                                                                           |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Services and related revenues                                                                       |   |   $                                                             | — |                               | $      | 6,694                                |   |   $ | 6,694                                         |   |            | $      | —                                                      |   | $      | — |   |   $ | 6,694   |   |   |
| Equipment sales                                                                                     |   |                                                                      | — |                               |   | 1,186                                |   |          | 1,186                                         |   |            |   | —                                                      |   |   | — |   |          | 1,186   |   |   |
| Other revenues                                                                                      |   |                                                                      | — |                               |   | 222                                  |   |          | 222                                           |   |            |   | —                                                      |   |   | — |   |          | 222     |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Total                        revenues                                                               |   |                                                                      | — |                               |   | 8,102                                |   |          | 8,102                                         |   |            |   | —                                                      |   |   | — |   |          | 8,102   |   |   |
| Operating expenses:                                                                                 |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Cost of equipment sold                                                                              |   |                                                                      | — |                               |   | 981                                  |   |          | 981                                           |   |            |   | —                                                      |   |   | — |   |          | 981     |   |   |
| Operations and cost of services (exclusive of depreciation                        and amortization) |   |                                                                      | 1,641   |                               |   | 3,812                                |   |          | 5,453                                         |   |            |   | —                                                      |   |   | — |   |          | 5,453   |   |   |
| Sales and marketing                                                                                 |   |                                                                      | 346     |                               |   | 671                                  |   |          | 1,017                                         |   |            |   | —                                                      |   |   | — |   |          | 1,017   |   |   |
| Research and development (exclusive of depreciation and                        amortization)        |   |                                                                      | 2,075   |                               |   | —                              |   |          | 2,075                                         |   |            |   | —                                                      |   |   | — |   |          | 2,075   |   |   |
| General and administrative                                                                          |   |                                                                      | 3,690   |                               |   | 1,955                                |   |          | 5,645                                         |   |            |   | 2,044                                                        |   |   | — |   |          | 7,689   |   |   |
| Depreciation and amortization                                                                       |   |                                                                      | 5,769   |                               |   | 578                                  |   |          | 6,347                                         |   |            |   | —                                                      |   |   | — |   |          | 6,347   |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Total                        operating expenses                                                     |   |                                                                      | 13,521  |                               |   | 7,997                                |   |          | 21,518                                        |   |            |   | 2,044                                                        |   |   | — |   |          | 23,562  |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Operating loss                                                                                      |   |                                                                      | (13,521 | )                                  |   | 105                                  |   |          | (13,416                                       | )      |            |   | (2,044                                                       | )      |   | — |   |          | (15,460 | )      |   |
| Other income (expense):                                                                             |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Interest income                                                                                     |   |                                                                      | 5,397   |                               |   | —                              |   |          | 5,397                                         |   |            |   | 482                                                          |   |   | (31     | )      |          | 5,848   |   |   |
| Interest expense                                                                                    |   |                                                                      | (12,117 | )                                  |   | —                              |   |          | (12,117                                       | )      |            |   | (43                                                          | )      |   | 31      |   |          | (12,129 | )      |   |
| Impairment of investment in TerreStar Networks                                                      |   |                                                                      | — |                               |   | —                              |   |          | —                                       |   |            |   | —                                                      |   |   | — |   |          | — |   |   |
| Other (expense) income, net                                                                         |   |                                                                      | 160     |                               |   | (30                                  | )      |          | 130                                           |   |            |   | 2                                                            |   |   | — |   |          | 132     |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Loss                        before provision for income taxes and minority interest                 |   |                                                                      | (20,081 | )                                  |   | 75                                   |   |          | (20,006                                       | )      |            |   | (1,603                                                       | )      |   | — |   |          | (21,609 | )      |   |
| Benefit                        (provision) for income taxes                                         |   |                                                                      | — |                               |   | (8                                   | )      |          | (8                                            | )      |            |   | —                                                      |   |   | — |   |          | (8      | )      |   |
| Minority interest                                                                                   |   |                                                                      | — |                               |   | —                              |   |          | —                                       |   |            |   | —                                                      |   |   | 1,800   |   |          | 1,800   |   |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |
| Net                        loss                                                                     |   |   $                                                             | (20,081 | )                                  | $      | 67                                   |   |   $ | (20,014                                       | )      |            | $      | (1,603                                                       | )      | $      | 1,800   |   |   $ | (19,817 | )      |   |
|                                                                                                |   |                                                                      |    |                               |   |                                 |   |          |                                          |   |            |   |                                                         |   |   |    |   |          |    |   |   |

23

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**Consolidated Results -            Comparison of the three months ended March 31, 2008 and 2007**

*     Revenues            and Cost of Equipment Sold*

          All            revenues and cost of equipment sold are generated by the Company’s MSV MSS            segment. See “MSV MSS - Comparison of the three months ended March 31, 2008 and            2007”.

***Operating            Expenses***

          The            table below sets forth the Company’s operating expenses and percentage changes            for the periods indicated (in thousands).

|                                                                                                |   |                                                    |   |                                                               |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                                |   | **Three months ended                        March 31,** |   |                                                               |   |
|                                                                                                |   |                                                         |   | **%                        Change in                        2008** |   |
|                                                                                                |   | **2008**                                                |   | **2007**                                                           |   |   |
|                                                                                                |   |                                                         |   |                                                                    |   |        |   |
| Cost of equipment                        sold                                                       |   | $                                                       | 974    |                                                               | $      | 981    |   |   | (0.7   | )%     |
| Operations and cost of                        services (exclusive of depreciation and amortization) |   |                                                    | 6,663  |                                                               |   | 5,453  |   |   | 22.2   | %      |
| Sales and                        marketing                                                          |   |                                                    | 2,643  |                                                               |   | 1,017  |   |   | 159.9  | %      |
| Research and                        development (exclusive of depreciation and amortization)        |   |                                                    | 4,107  |                                                               |   | 2,075  |   |   | 97.9   | %      |
| General and                        administrative                                                   |   |                                                    | 7,577  |                                                               |   | 7,689  |   |   | (1.5   | )%     |
| Depreciation and                        amortization                                                |   |                                                    | 8,081  |                                                               |   | 6,347  |   |   | 27.3   | %      |
|                                                                                                |   |                                                         |        |                                                               |        |        |   |        |        |   |
| Total operating                        expenses                                                     |   | $                                                       | 30,045 |                                                               | $      | 23,562 |   |   | 27.5   | %      |
|                                                                                                |   |                                                         |        |                                                               |        |        |   |        |        |   |

*     Operations            and Cost of Services*

          Operations            and cost of services expenses include compensation costs of MSS operations employees            and expenses related to the operation of the Company’s satellite network, new            product development relating to next generation services, costs of telemetry, tracking,            and control, and facility costs. Operations and cost of services expenses increased            during the three months ended March 31, 2008, as compared to the same period in 2007            due primarily to increases in compensation costs, and increases in equity-based            compensation related to the February 2008 modifications to outstanding            options.

*     Sales            and Marketing*

          Sales            and marketing expenses include the compensation of sales and marketing employees, and            the cost of advertising, marketing and promotion. Sales and marketing expenses            increased during the three months ended March 31, 2008, as compared to the same period            in 2007, due to increases in compensation costs and staffing levels, increases in            equity-based compensation related to the February 2008 modifications to outstanding            options, and costs related to the development of a prototype device (shell for purposes            of look and feel design) for the next generation network.

*     Research            and Development*

          Research            and development expenses include the compensation costs of employees working on next            generation products and services, and other development costs of the next generation            network. Research and development expenses increased during the three months ended            March 31, 2008, as compared to the same period in 2007, due primarily to increased            third-party consulting expenses, compensation costs and staffing levels.

*     General            and Administrative*

          General            and administrative expenses include the compensation costs of finance, legal, human            resources employees and other corporate costs. General and administrative expenses            decreased during the three months ended March 31, 2008, as compared to the same period            in 2007, due to taxes associated with the exercise of employees options in the three            months ended March 31, 2007, and a reduction in professional fees. Offsetting these            declines were increases in legal fees and equity-based compensation expenses related to            the February 2008 modifications to outstanding options.

*     Depreciation            and Amortization*

          Depreciation            and amortization expenses consist of the depreciation of property and equipment and the            amortization of intangible assets. Depreciation and amortization expenses increased            during the three months ended March 31, 2008, as

24

----

compared to the same period in            2007, due to an increase in intangible assets resulting from the TerreStar Corporation            Exchange Transactions, that occurred in February and November 2007.

***Other Income and            Expenses***

The following table sets forth            other income and expenses for the periods indicated (in thousands):

|                                                                  |   |                                                    |    |     |   |                                |   |   |   |   |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------|---------|----------|--------|-------------------------------------|--------|--------|--------|--------|
|                                                                  |   | **Three months ended                        March 31,** |    |     |   |                                |
|                                                                  |   |                                                         |    |     |   |                                |
|                                                                  |   | **2008**                                                |    | **2007** |   | **%                        Change** |   |
|                                                                  |   |                                                         |    |          |   |                                     |   |
| Interest                        income                                |   | $                                                       | 3,221   |     | $      | 5,848                               |   |   | (44.9  | )%     |
| Interest                        expense                               |   |                                                    | (11,716 | )        |   | (12,129                             | )      |   | (3.4   | )%     |
| Impairment of                        investment in TerreStar Networks |   |                                                    | (8,353  | )        |   | —                             |   |   | (100.0 | )%     |
| Other income                                                          |   |                                                    | 664     |     |   | 132                                 |   |   | 403.0  | %      |
| Benefit (provision) for                        income taxes           |   |                                                    | 275     |     |   | (8                                  | )      |   | 100.0  | %      |
| Minority                        interest                              |   |                                                    | 151     |     |   | 1,800                               |   |   | (91.6  | )%     |
|                                                                  |   |                                                         |         |     |        |                                     |   |        |        |   |
| Total other                        expenses                           |   | $                                                       | (15,758 | )        | $      | (4,357                              | )      |   | 261.7  | %      |
|                                                                  |   |                                                         |         |     |        |                                     |   |        |        |   |

*     Interest            Income*

          Interest            income is interest earned on cash, cash equivalents, restricted cash and short-term            investments. Interest income decreased during the three months ended March 31, 2008, as            compared to the same period in 2007 due to the decrease of cash, cash equivalents, and            short-term investments.

*     Interest            Expense*

          Interest            expense is comprised of the amortization of the discount and debt issuance costs on            Senior Secured Discount Notes, the Senior Unsecured Notes, and interest incurred on            Notes Payable, Vendor offset by capitalized interest on the system under construction.            Interest expense was consistent during the three months ended March 31, 2008, as            compared to the same period in 2007. Increased interest expense related to the Senior            Unsecured Notes was offset by increase in capitalized interest on the system under            construction (interest of $14.1 million and $4.5 million was capitalized during the            three months ended March 31, 2008 and 2007, respectively).

*          Impairment            of investment in TerreStar Networks*

          During            the three months ended March 31, 2008, the Company recorded a write-down of its            investment in TerreStar Networks in the amount of $8.4 million as the Company            determined the TerreStar Networks investment had become other-than-temporarily            impaired.

*     Benefit            (Provision) for Income Taxes*

          The            Company’s effective tax rate differs from the Federal statutory rate of 34%, due            primarily to a full valuation allowance recorded on net operating losses.

*     Minority            Interest*

          Minority            interest represents the portion of MSV net losses attributable to minority interest            holders. Minority interest decreased during the three months ended March 31, 2008, as            compared to the same period in 2007 due to the Company’s acquisition of MSV            interests resulting from the TerreStar Exchange Transactions that occurred in February            and November 2007.

25

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**Segment            Results**

**MSV Next Generation -            Comparison of the three months ended March 31, 2008 and 2007**

**Operating            Expenses**

          MSV            Next Generation operations relate to the planning, development, and building of a next            generation satellite system complemented by ATC. The table below sets forth MSV Next            Generation operating expenses and percentage change for the following periods indicated            (in thousands).

|                                                                                                |   |                                                    |   |     |   |                                |   |   |   |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|----------|--------|-------------------------------------|--------|--------|--------|--------|
|                                                                                                |   | **Three months ended                        March 31,** |   |     |   |                                |
|                                                                                                |   | **2008**                                                |   | **2007** |   | **%                        Change** |   |
|                                                                                                |   |                                                         |   |          |   |                                     |   |
| Operations and cost of                        services (exclusive of depreciation and amortization) |   | $                                                       | 2,600  |     | $      | 1,641                               |   |   | 58.4   | %      |
| Sales and                        marketing                                                          |   |                                                    | 1,555  |     |   | 346                                 |   |   | 349.4  | %      |
| Research and                        development (exclusive of depreciation and amortization)        |   |                                                    | 4,107  |     |   | 2,075                               |   |   | 97.9   | %      |
| General and                        administrative                                                   |   |                                                    | 3,952  |     |   | 3,690                               |   |   | 7.1    | %      |
| Depreciation and                        amortization                                                |   |                                                    | 7,439  |     |   | 5,769                               |   |   | 28.9   | %      |
|                                                                                                |   |                                                         |        |     |        |                                     |   |        |        |   |
| Total operating                        expenses                                                     |   | $                                                       | 19,653 |     | $      | 13,521                              |   |   | 45.4   | %      |
|                                                                                                |   |                                                         |        |     |        |                                     |   |        |        |   |

          MSV            Next Generation expenses relate to activities to deploy a next generation satellite            system complemented by ATC. Although many of the costs incurred are fixed in the            short-term, other costs fluctuate based on underlying business or development activity.            Operations expenses are dependent upon employee-related costs. Sales and marketing            expenses are dependent on employee-related costs and the nature and extent of marketing            and promotional activities. General and administrative expenses consist of            employee-related and other costs related to corporate services, including finance,            legal, and human resources.

*     Operations            and Cost of Services*

          Operations            and cost of services expenses include compensation costs of satellite operations            employees related to activities to deploy a next generation satellite system, facility            costs, and costs of new product and service development relating to next generation            product offerings. Operations expenses increased during the three months ended March            31, 2008, as compared to the same period in 2007, with 54% of the increase due to            compensation costs and staffing levels, and 46% of the increase attributable to            equity-based compensation primarily related to the February 2008 modifications to            outstanding options.

*     Sales            and Marketing*

          Sales            and marketing expenses include the compensation of sales and marketing employees, and            the cost of advertising, marketing and promotion. Sales and marketing expenses            increased during the three months ended March 31, 2008, as compared to the same period            in 2007, with 36% of the increase due to an increase in compensation costs and staffing            levels and 51% of the increase attributable to equity-based compensation primarily            related to the February 2008 modifications to outstanding options, and 14% of the            increase related to the development of a prototype next generation device (shell for            purposes of look and feel design).

*     Research            and Development*

          Research            and development expenses include the compensation costs of employees working on next            generation products, services and other development and deployment costs of the            Company’s next generation network. Research and development expenses increased            during the three months ended March 31, 2008, as compared to the same period in 2007,            primarily related to third-party consulting expenses in the development of next            generation operating systems. Other increases related to compensation costs and            increased staffing levels. These increases were offset by decreases in legal            expenses.

*     General            and Administrative*

          General            and administrative expenses include the compensation costs of finance, legal, and human            resources employees allocable to MSV Next Generation development. Increases related to            legal fees and equity-based compensation expenses in connection with the February 2008            modifications to outstanding options, and were offset by reductions in employee-related            costs and professional fees.

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*     Depreciation            and Amortization*

          Depreciation            and amortization expenses consist of the depreciation of property and equipment and the            amortization of intangible assets. Depreciation and amortization expenses increased            during the three months ended March 31, 2008, as compared to the same period in 2007            due to an increase in intangible assets resulting from the TerreStar Corporation            Exchange Transactions that occurred in February and November 2007.

**MSV MSS - Comparison of the            three months ended March 31, 2008 and 2007**

          MSV            MSS relate to the provision of mobile satellite services that support the delivery of            data, voice, fax and dispatch radio services using its existing in-orbit            satellites.

***Revenues***

The following table sets forth            MSV MSS revenues and percentage changes for the periods indicated (in            thousands):

|                                  |   |                                                    |   |     |   |                                |   |   |   |   |
|---------------------------------------|--------|---------------------------------------------------------|--------|----------|--------|-------------------------------------|--------|--------|--------|--------|
|                                  |   | **Three months ended                        March 31,** |   |     |   |                                |
|                                  |   |                                                         |   |     |   |                                |
|                                  |   | **2008**                                                |   | **2007** |   | **%                        Change** |   |
|                                  |   |                                                         |   |          |   |                                     |   |
| Revenues                              |   |                                                    |   |     |   |                                |   |   |   |   |
| Capacity                              |   | $                                                       | 3,121  |     | $      | 3,047                               |   |   | 2.4    | %      |
| Telephony                             |   |                                                    | 2,464  |     |   | 2,332                               |   |   | 5.7    | %      |
| Data                                  |   |                                                    | 837    |     |   | 671                                 |   |   | 24.7   | %      |
| Dispatch                              |   |                                                    | 693    |     |   | 644                                 |   |   | 7.6    | %      |
| Equipment                             |   |                                                    | 1,222  |     |   | 1,186                               |   |   | 3.0    | %      |
| Other                                 |   |                                                    | 256    |     |   | 222                                 |   |   | 15.3   | %      |
|                                  |   |                                                         |        |     |        |                                     |   |        |        |   |
| Total                        revenues |   | $                                                       | 8,593  |     | $      | 8,102                               |   |   | 6.1    | %      |
|                                  |   |                                                         |        |     |        |                                     |   |        |        |   |

*     Capacity*

          The            Company provides bandwidth and power to certain customers who implement and operate            their own networks. The specified bandwidth and power is generally customer dedicated            once purchased and is not subject to other sale or preemption by MSV except for            emergency purposes. Capacity customers generally operate under contractual arrangements            ranging from short-term (month-to-month) to end of current satellite life in length.            These contracts do not generally provide for annual increases or variable revenues. As            such, capacity revenues for the three months ended March 31, 2008, as compared to the            same period in 2007 have not fluctuated significantly.

*     Telephony*

          The            Company provides voice service to end-users. Telephony customers are acquired through            retail dealers or resellers. Retail dealers receive activation fees and earn            commissions on monthly end user fixed access revenues and variable usage revenues.            Resellers are under contractual arrangements for their purchase of monthly access and            usage, and they manage the arrangements with the end user. Telephony customers are            charged fixed monthly access fees and variable usage charges, generally charged by            minute of usage, depending on voice plan chosen. A typical customer telephony plan            requires monthly access fees that range from $25 to $175 that includes from zero to            2000 free airtime minutes. Each additional minute used is charged at a rate of $0.89 to            $1.19. Monthly network access revenue is recognized in the month of service to the            end-user. Variable usage revenue is recognized during the period of end-user usage.            Activation fees are deferred and recognized ratably over the customer’s            contractual service term, generally one year.

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          The            following table sets forth telephony subscribers, quarterly subscriber changes, and            average monthly revenue per subscriber unit (“ARPU”):

|                                                |   |                                                    |   |     |   |     |   |     |   |                                          |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------|--------|---------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|-----------------------------------------------|--------|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                |   | **Three months ended                        March 31,** |
|                                                |   |                                                         |
|                                                |   | **2008**                                                |   | **ARPU** |   | **2007** |   | **ARPU** |   | **Change                        Subscribers** |   | **Change                        ARPU** |   |
|                                                |   |                                                         |   |          |
|                                                |
| Total subscribers,                        January 1 |   |                                                    | 19,866 |     |   |     |   |     | 19,133 |                                          |   |                                   |   |   |   | 3.8    | %      |   |   |   |   |   |   |
| Additions                                           |   |                                                    | 548    |     |   |     |   |     | 760    |                                          |   |                                   |   |   |   | (27.9  | %)     |   |   |   |   |   |   |
| Deletions                                           |   |                                                    | (443   | )        |   |     |   |     | (444   | )                                             |   |                                   |   |   |   | (0.2   | %)     |   |   |   |   |   |   |
|                                                |   |                                                         |        |          |        |          |   |          |        |                                               |        |                                        |   |        |        |        |        |        |        |        |        |        |        |
| Total subscribers,                        March 31  |   |                                                    | 19,971 |     | $      | 41.03    |   |     | 19,449 |                                          | $      | 41.12                                  |   |   |   | 2.7    | %      |   |   |   | (0.2   | %)     |   |
|                                                |   |                                                         |        |          |        |          |   |          |        |                                               |        |                                        |   |        |        |        |        |        |        |        |        |        |        |

Telephony revenues for the three            months ended March 31, 2008, as compared to the same period in 2007, increased due to            an increase in subscribers.

*     Data*

          Data            service provides transmission in an “always-on” fashion. Common            applications for data customers include fleet and load management, credit card            verification, e-mail, vehicle position reporting, mobile computing, and data message            broadcasting. Customers are acquired through resellers. Resellers are under contractual            arrangements for their purchase of monthly access and usage and manage the arrangements            with the end user.

          Data            revenues for the three months ended March 31, 2008, as compared to the same period in            2007 increased due to an increase of 12.5% in the average number of subscribers and an            increase of 11.4% in average monthly revenue per subscriber unit.

*     Dispatch*

          Dispatch            service provides the wide-area equivalent of “push-to-talk” two-way radio            service among users in customer defined groups. Dispatch service facilitates team-based            group operations and is highly suited for emergency communications. Customers are            acquired through dealers and resellers. Resellers are under contractual arrangements            for their purchase of monthly access from the Company, and manage the arrangements with            the end user. Dispatch users pay a fixed monthly access fee for virtually unlimited            monthly usage; however, the fee varies with the coverage available.

          Dispatch            revenues for the three months ended March 31, 2008, as compared to the same period in            2007 increased primarily due to an increase of in the average number of            subscribers.

*     Equipment*

          New            and existing subscribers to the network can purchase a range of satellite handset            configurations. Hardware generally includes handsets, antennas, and cables and can be            purchased in “kits” that include all the hardware a customer would            typically need to utilize the network. Resellers may purchase equipment in advance for            purposes of resale to their end users. User equipment can be portable or be installed            on trucks, ships, and airplanes or at a fixed location. Handsets are capable of            standard voice and dispatch communication, and services such as call forwarding, call            waiting, and conference calling. Other equipment is capable of file transfers, faxes            and e-mail. Users must acquire equipment from the Company or its resellers to access            its network. Capacity customers provide their own equipment to the end users of their            networks.

          The            Company’s ability to generate equipment revenues is a function of the number of            new and existing subscribers who purchase handsets and other accessories and the prices            at which equipment is sold. Historically, equipment promotion and pricing has not been            used to increase customer activations or improve retention. Equipment sales during the            three months ended March 31, 2008, as compared to the same period in 2007 did not            fluctuate significantly.

***Operating            Expenses***

          The            table below sets forth MSV MSS operating expenses and percentage changes for the            periods indicated (in thousands).

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|                                                                                                |   |                                                    |   |     |   |                                |   |   |   |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|----------|--------|-------------------------------------|--------|--------|--------|--------|
|                                                                                                |   | **Three months ended                        March 31,** |   |     |   |                                |
|                                                                                                |   | **2008**                                                |   | **2007** |   | **%                        Change** |   |
|                                                                                                |   |                                                         |   |          |   |                                     |   |
| Cost of equipment                        sold                                                       |   | $                                                       | 974    |     | $      | 984                                 |   |   | (1.0   | )%     |
| Operations and cost of                        services (exclusive of depreciation and amortization) |   |                                                    | 4,063  |     | $      | 3,810                               |   |   | 6.6    | %      |
| Sales and                        marketing                                                          |   |                                                    | 1,088  |     |   | 671                                 |   |   | 62.1   | %      |
| General and                        administrative                                                   |   |                                                    | 2,207  |     |   | 1,955                               |   |   | 12.9   | %      |
| Depreciation and                        amortization                                                |   |                                                    | 642    |     |   | 577                                 |   |   | 11.3   | %      |
|                                                                                                |   |                                                         |   |          |   |                                     |   |
| Total operating                        expenses                                                     |   | $                                                       | 8,974  |     | $      | 7,997                               |   |   | 12.2   | %      |
|                                                                                                |   |                                                         |   |          |   |                                     |   |

          Although            many of the costs incurred in the operation of the current network are fixed in the            short-term, other costs will fluctuate based on underlying business activity.            Operations expenses are dependent upon employee costs and the costs of monitoring the            satellite, including telemetry, tracking, and control. Sales and marketing expenses are            dependent on employee costs and the nature and extent of any marketing and promotional            activities. General and administrative expenses consist of employee and other costs            related to finance, legal, and human resources.

*     Cost            of Equipment Sold*

          The            cost of equipment sold is comprised of the cost of equipment purchased for resale. The            Company does not manufacture any of its own equipment. Also included in cost of            equipment sold are the costs of warehousing and warehousing services. Cost of equipment            sold during the three months ended March 31, 2008, as compared to the same period in            2007 did not fluctuate significantly.

*     Operations            and Cost of Service*

          Operations            and costs of service expenses include compensation costs of satellite operations            employees, and other expenses related to the operation of the satellite wireless            network, costs of telemetry, tracking, and control and facility costs. Operations and            costs of service expenses increased during the three months ended March 31, 2008, as            compared to the same period in 2007 due to increases in facilities cost and an increase            in equity-based compensation expense related to the February 2008 modifications to            outstanding options. Offsetting these increases were declines in network operations and            employee related costs.

*     Sales            and Marketing*

          Sales            and marketing costs include the compensation costs of sales and marketing employees,            and the cost of advertising, marketing and promotion. Sales and marketing expenses            increased during the three months ended March 31, 2008, as compared to the same period            in 2007, with most of the increase due to an increase in compensation costs and            staffing levels and the remainder due to an increase in equity-based compensation            expense related to the February 2008 modifications to outstanding options.

*     General            and Administrative Expense*

          General            and administrative expense includes the compensation costs of finance, legal, human            resources and other corporate costs allocable to MSV MSS. General and administrative            expenses increased during the three months ended March 31, 2008, as compared to the            same period in 2007 due to increases in legal and regulatory expenses and an increase            in equity-based compensation expense related to the February 2008 modifications to            outstanding options. Offsetting these increases was a decline in consulting            fees.

*     Depreciation            and Amortization Expense*

          Depreciation            and amortization expense consists of the depreciation of property and equipment and the            amortization of intangible assets. Depreciation and amortization expenses increased            during the three months ended March 31, 2008, as compared to the same period in 2007,            due to the increase in intangible assets resulting from the TerreStar Corporation            Exchange Transactions, that occurred in February and November 2007.

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**SkyTerra Corporate -            Comparison of the three months ended March 31, 2008, and 2007**

**Operating            Expenses**

The table below sets forth            SkyTerra Corporate operating expenses and percentage change for the periods indicated            (in thousands).

|                                              |   |                                                    |   |     |   |                                |   |   |   |   |
|---------------------------------------------------|--------|---------------------------------------------------------|--------|----------|--------|-------------------------------------|--------|--------|--------|--------|
|                                              |   | **Three months ended                        March 31,** |   |     |   |
|                                              |   | **2008**                                                |   | **2007** |   | **%                        Change** |   |
|                                              |   |                                                         |   |          |   |                                     |   |
| General and                        administrative |   |                                                    | 1,418  |     |   |                                | 2,044  |   |   |   | (30.6)% |   |   |
|                                                   |        |                                                         |        |          |        |                                     |

*     General            and Administrative Expense*

          General            and administrative expense includes the Company’s corporate costs, including            legal, audit, tax, insurance, and compensation costs. General and administrative            expenses decreased during the three months ended March 31, 2008, as compared to the            same period in 2007, primarily due to a decline in corporate insurance costs and a            decrease in equity-based compensation expense.

**Liquidity and Capital            Resources**

          The            Company’s principal sources of liquidity are cash, cash equivalents, short-term            investments and accounts receivable. The Company’s primary cash needs are for            working capital, capital expenditures and debt service. The Company’s ability to            generate cash in the future is subject to general economic, financial, competitive,            legislative, regulatory and other factors that are beyond the Company’s            control.

          The            Company has financed its operations to date through the private placement of debt,            equity securities and vendor financing. As of March 31, 2008, the Company has $260.6            million of cash and short-term investments. The outstanding accreted amount of            MSV’s Senior Secured Discount Notes was $571.9 million ($750 million face amount            at maturity). The outstanding accreted amount of MSV’s Senior Unsecured Notes was            $123.1 million ($150 million face amount at maturity). Cash payment of interest on the            Senior Secured Discount Notes will begin in April 2010, and cash payment of principal            will begin in April 2013 (see “Senior Secured Discount Notes” below). The            Senior Unsecured Notes bear interest at a rate of 16.5%, payable in cash or in-kind, at            MSV’s option until December 15, 2011, and thereafter payable in cash (see            “Senior Unsecured Notes” below).

          The            Company believes that its existing cash resources will not be sufficient to satisfy            anticipated cash requirements for the next twelve months. The Company has significant            operating and contractual obligations. The Company’s current operating            assumptions and projections, which reflect management’s best estimate of future            revenue, operating expenses, and capital commitments, indicate that the Company’s            current sources of liquidity will be sufficient to fund operations through December 31,            2008, however, additional funding will be required in early 2009. The Company’s            ability to meet its projections, however, is subject to uncertainties, and there can be            no assurance that the Company’s current projections will be accurate.

                      The Company is actively pursuing means to extend its liquidity and capital resources.            These plans may include the sale of its investment in TerreStar Networks, a capital            infusion through an equity or debt investment with a strategic partner, a capital            infusion through the sale of additional debt or equity, renegotiation of vendor payment            schedules to delay payment into the future, or some combination of these actions. While            the Company is actively exploring these alternatives, there can be no assurances that            it will be able to complete a transaction, or do so on terms that are favorable to the            Company. Any deferrals or restructurings could delay the Company’s satellite            program or otherwise negatively affect the development of the next generation network.            If the Company is not able to obtain additional funding, or defer or otherwise            restructure its significant contractual obligations, the Company may not be able to            continue meeting its obligations on an ongoing basis, if at all, and the Company may be            required to consider alternatives such as selling assets, ceasing work on its next            generation network, or restructuring its debt obligations.

*Capital Required for Next            Generation Network*

          The            Company estimates the remaining cost to develop and construct the two satellite            components of its next generation network, including the costs of the satellites, their            launch, launch insurance, and associated ground segment will be significant. The            majority of these expenditures are governed by contractual commitments. The Company            estimates that it will require additional financing of $350 to $400 million to operate            the business until the launch of the first satellite, taking into consideration its            current cash position.

          The            Company will also require significant additional funds to construct a terrestrial            component of the network (not included in the estimated $350 to $400 million required            noted above). The Company estimates the deployment of the terrestrial portion of the            network could be a multi-billion dollar undertaking depending on the choice of air            interface technology, the number of markets deployed, the scope of the terrestrial            build within each market and the service offering.

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          The            cost of building and deploying the satellites and next generation network could exceed            current estimates. For example, if the Company elects to defer payments under the            satellite construction contract, modify design, and/or exercise certain options to buy            additional satellites or other equipment or services, the costs for the satellite            component of the network will increase, possibly significantly. The cost to develop            devices could be greater, perhaps significantly, than current estimates, depending on            the ability to attract distribution partners for both the satellite and terrestrial            services. In addition, the magnitude of the terrestrial network capital requirement            depends upon a number of factors including: choice of wireless technology; desired            applications; the general pace of construction; and in the profits, or losses in the            initially deployed markets. In addition, the Company may not have control over these            factors as it works with various strategic and distribution partners who may have            varying degrees of influence on these decisions in exchange for capital contributions            and other commitments. In all scenarios, the Company will require significant            additional capital beyond its current resources.

*Other Significant Contractual            Obligations*

          In            October 2006, MSV entered into an agreement with Hughes Network Systems, LLC (HNS),            then a related party of the Apollo stockholders, to purchase four base transceiver            subsystems and air interface technology for a fixed price of $43.0 million. The            transceiver subsystems will integrate the satellite component of the next generation            network.

          In            May 2007, MSV entered into fixed price contracts with ILS International Launch            Services, Inc. and Sea Launch Company, LLC to launch the next generation satellites.            MSV plans to launch its first new satellite, MSV-1 in 2009 and the identical Canadian            satellite, MSV-2 in 2010. The aggregate cost for these agreements is $174.8 million.            MSV may incur liquidated damages if the respective contracts are terminated for            convenience by the Company. If MSV were to terminate the contracts prior to September            2008, the maximum liquidated damages would be $8.9 million, in addition to amounts            already paid. If MSV were to terminate the contracts after September 2008 it would not            incur any liquidated damages.

          In            March 2008, MSV entered into an agreement with Telesat Canada for joint operational            services for the MSV-1 and MSV-2 satellites including the development of software for            operation and control of the satellites, and the provision of telemetry, tracking and            control services for the new MSV spacecrafts once they are in their designated orbital            positions.  Telesat will provide these operational services through 2025 assuming            the satellites reach their full mission life. MSV is entitled to delay the start of            services under the agreement for up to one year due to launch delays without any impact            to pricing. The Company also has a contract with Telesat also provides telemetry,            tracking and control services to the Company for its existing satellites.

*     Vendor            Financing*

          The            Company has financed $50.8 million of satellite vendor payments with secured vendor            notes payable (Vendor Notes) that bear interest of LIBOR plus 400 basis points combined            with a 2% administrative fee. The Vendor Notes are secured by the satellites. MSV will            be required to pay interest monthly on the amount outstanding beginning the month            subsequent to the utilization of the available credit. All outstanding Vendor Notes            must be repaid prior to satellite delivery. MSV anticipates making payments of            principal beginning in the fourth quarter of 2008. MSV may prepay some or all of the            Vendor Notes at anytime with no penalties.

*     Senior            Secured Discount Notes*

          In            March 2006, MSV issued Senior Secured Discount Notes that generated proceeds of $436.2            million, with an aggregate principal amount of $750 million at maturity. Interest on            the notes will accrete from the issue date at an annual rate of 14.0%, until they reach            full principal amount at April 1, 2010 (the Senior Secured Discount Notes). All of            MSV’s domestic subsidiaries jointly and severally guarantee the Senior Secured            Discount Notes. MSV will be required to accrue and pay cash interest on the notes for            all periods after April 1, 2010 at an annual rate of 14.0%, and cash interest            payments will be payable in arrears semiannually on April 1 and October 1,            commencing on October 1, 2010. The Senior Secured Discount Notes will mature on            April 1, 2013. The Senior Secured Discount Notes are secured by substantially all            of MSV’s assets.

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          The            terms of the Senior Secured Discount Notes require MSV to comply with certain covenants            that restrict some of MSV’s corporate activities, including MSV’s ability            to incur additional debt, pay dividends, create liens, make investments, sell assets,            make capital expenditures, repurchase equity or subordinated debt, and engage in            specified transactions with affiliates. MSV may incur indebtedness beyond the specific            baskets allowed under the Senior Secured Discount Notes, provided MSV maintains a            leverage ratio of 6.0 to 1.0. Noncompliance with any of the covenants without cure or            waiver would constitute an event of default under the Senior Secured Discount Notes. An            event of default resulting from a breach of a covenant may result, at the option of the            note holders, in an acceleration of the principal and interest outstanding. The Senior            Secured Discount Notes also contain other customary events of default (subject to            specified grace periods), including defaults based on events of bankruptcy and            insolvency, and nonpayment of principal, interest or fees when due. MSV was in            compliance with the covenants of the Senior Secured Discount Notes as of March 31,            2008.

*     Senior            Unsecured Notes*

                      On December 15, 2007, the Company and MSV entered into a Securities Purchase            Agreement with Harbinger Capital Partners Master Fund I, Ltd., and Harbinger Capital            Partners Special Situations Fund L.P. (together Harbinger), pursuant to which Harbinger            agreed to purchase $150 million of MSV’s Senior Unsecured Notes due 2013 (the            “Senior Unsecured Notes”) and ten year warrants to purchase 9.1 million            shares of the Company’s common stock, with an exercise price of $10 per share.            The transaction closed on January 7, 2008.  The Senior Unsecured Notes bear            interest at a rate of 16.5%, payable in cash or in-kind, at MSV’s option until            December 15, 2011, and thereafter payable in cash. The Senior Unsecured Notes            mature on May 1, 2013.

          The            Senior Unsecured Notes have subsidiary guarantees and covenants similar to those            contained in the Senior Secured Discount Notes, with such modifications as appropriate            to reflect the financial terms of the Senior Unsecured Notes. The Securities Purchase            Agreement also contains more restrictive covenants regarding mergers, consolidation and            transfer of assets and restricted payments. The more restrictive covenants, the right            of first negotiation and the pre-emptive rights expire once Harbinger and their            affiliates beneficially own less than 5% of the outstanding common stock of the Company            or, if earlier, on December 31, 2011. The terms of the Senior Unsecured Notes require            MSV to comply with certain covenants that restrict some of MSV’s corporate            activities, including MSV’s ability to incur additional debt, pay dividends,            create liens, make investments, sell assets, make capital expenditures, repurchase            equity or subordinated debt, and engage in specified transactions with affiliates.            Noncompliance with any of the covenants without cure or waiver would constitute an            event of default under the Senior Unsecured Notes. An event of default resulting from a            breach of a covenant may result, at the option of the note holders, in an acceleration            of the principal and interest outstanding. The Senior Unsecured Notes also contain            other customary events of default (subject to specified grace periods), including            defaults based on events of bankruptcy and insolvency, and nonpayment of principal,            interest or fees when due. MSV was in compliance with the covenants of the Senior            Unsecured Notes as of March 31, 2008.

*          Inmarsat            Cooperation Agreement*

          To            further organize large blocks of contiguous spectrum for the use of MSV and its            potential future partners, in December 2007, SkyTerra, MSV and MSV Canada (together the            MSV Parties) and Inmarsat Global Limited (Inmarsat) entered into a Cooperation            Agreement relating to the use of L-band spectrum for both mobile satellite services and            ATC services in North America. The Cooperation Agreement addresses a number of            regulatory, technology and spectrum coordination matters involving L-band            spectrum.

          Upon            receipt of an investment of $100 million in MSV by a third party for general corporate            purposes and election by the MSV Parties to trigger certain provisions, the MSV Parties            will be able to expand its trials and deployments to a broadband ATC trial using wider            spectrum bandwidths, on a specific designation of combined Inmarsat and MSV spectrum in            a pre-

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agreed market. Simultaneously            upon the election by the MSV Parties regarding such an investment, the Company is            required to issue to Inmarsat $31.3 million of the Company’s common stock, valued            in accordance with terms of the agreement.

          Upon            the occurrence of certain events, until September 1, 2011, the MSV Parties have the            option (the Phase 1 Option), subject to certain conditions, to effect a transition to a            modified band plan within an 18 to 30 month period. Such transition will include            modification of certain of Inmarsat’s network and end user devises and a shift in            frequencies between the MSV Parties and Inmarsat which would lead to additional            spectrum contiguity and more relaxed operating rules for the Company. Over the            transition period, the MSV Parties will be required to make payments to Inmarsat of            $250 million in cash. Upon the commencement of Phase 1, the Company will issue to            Inmarsat a number of shares of the Company’s common stock having a value of $31.3            million, valued in accordance with terms of the agreement. Upon the completion of the            transition of the spectrum in Phase 1, the Company will issue to Inmarsat a number of            shares of the Company’s common stock having a value of $56.3 million based on the            average closing price of the Company’s common stock for the prior forty five            (45)-trading day period. In addition, the MSV Parties have the option to accelerate the            transition time by accelerating payment to Inmarsat of $50 million that would be            credited towards the $250 million in cash payments.

          Subsequent            to the exercise of the Phase 1 Option, between January 1, 2010 and January 1, 2013, the            MSV Parties have the option (the Phase 2 Option) for Inmarsat to modify its North            American operations in a manner that will make additional spectrum available for ATC at            a cost to the Company of $115 million per year, resulting in substantially more            spectrum to the MSV Parties available for MSS/ATC. If the Company does not exercise the            Phase 2 Option, then between January 1, 2013 and January 1, 2015, Inmarsat would have            the option to require the MSV Parties to exercise the equivalent of the Phase 2 Option            upon the same terms.

*Future Financing            Needs*

          In            addition to short-term financing needs, the Company will need significant additional            financing in the future. This additional financing may take the form of loans under a            credit facility, the issuance of bonds or other types of debt securities, the issuance            of equity securities or a combination of the foregoing. Debt or additional equity            financing may not be available when needed, on favorable terms, or at all. Any debt            financing the Company obtains may impose various restrictions and covenants on the            Company which could limit its ability to respond to market conditions, provide for            unanticipated capital investments or take advantage of business opportunities. The            Company may also be subject to significant interest expense under the terms of any debt            the Company incurs.

          The            Company continues dialogue with other MSS operators who operate systems in adjacent            spectrum in the L-band with the objective of rearranging respective spectrum            assignments to create contiguous blocks of spectrum, and in some instances enabling MSV            to access additional spectrum for the benefit of MSV and its strategic partners. The            consummation of agreements of this nature could result in significant time, effort and            compensation. The likelihood or timing of reaching such agreements is            uncertain.

*Off-balance Sheet            Financing*

          The            Company did not enter into any off-balance sheet arrangements, other then operating            leases in the normal course of business during the three months ended March 31, 2008.            As of March 31, 2008, the Company does not have any off-balance sheet arrangements that            had or were reasonably likely to have a current or future impact on its financial            condition, changes in financial condition, revenues or expenses, results of operations,            liquidity, capital expenditures or capital resources.

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*Future Minimum            Commitments*

          The            Company leases office space, computers and other equipment under operating lease            agreements. In addition to base rent, the Company is responsible for certain taxes,            utilities and maintenance costs, and several leases include options for renewal or            purchase. The Company’s various non-cancelable vendor arrangements (including            satellite, launch vehicle, base transceiver subsystems and air interface technology            construction), long-term and other debt arrangements, non-cancelable operating leases            and agreements with initial terms of greater than one year are as follows as of March            31, 2008 for the years ending December 31 (in thousands):

|       |   |       |    |                                  |   |    |   |                                       |    |                                                                             |   |     |   |      |   |      |   |      |   |   |   |   |   |      |   |
|------------|--------|------------|---------|---------------------------------------|--------|---------|--------|--------------------------------------------|---------|----------------------------------------------------------------------------------|--------|----------|--------|-----------|--------|-----------|--------|-----------|--------|--------|--------|--------|--------|-----------|--------|
|       |   | **Leases** |    | **Boeing                        (a)** |   | **HNS** |   | **Launch                        Services** |    | **Satellite                        Operational                        Services** |   | **Debt** |   | **Other** |   | **Total** |   |
|       |   |            |    |                                       |   |         |   |                                            |    |                                                                                  |   |          |   |           |   |           |   |
| 2008       |   | $          | 1,933   |                                  | $      | 108,029 |   | $                                          | 13,227  |                                                                             | $      | 24,660   |   | $         | 2,276  |      | $      | 32,600    |   | $      | 5,257  |   | $      | 187,982   |   |
| 2009       |   |       | 2,008   |                                  |   | 103,759 |   |                                       | 10,946  |                                                                             |   | 98,316   |   |      | 2,884  |      |   | 79,495    |   |   | 3,924  |   |   | 301,332   |   |
| 2010       |   |       | 1,882   |                                  |   | 4,550   |   |                                       | — |                                                                             |   | 38,589   |   |      | 1,884  |      |   | 87,813    |   |   | 300    |   |   | 135,018   |   |
| 2011       |   |       | 298     |                                  |   | — |   |                                       | — |                                                                             |   | —  |   |      | 1,434  |      |   | 146,380   |   |   | 158    |   |   | 148,270   |   |
| 2012       |   |       | — |                                  |   | — |   |                                       | — |                                                                             |   | —  |   |      | 1,434  |      |   | 151,251   |   |   | 158    |   |   | 152,843   |   |
| Thereafter |   |       | — |                                  |   | — |   |                                       | — |                                                                             |   | —  |   |      | 17,447 |      |   | 968,045   |   |   | 1,895  |   |   | 987,387   |   |
|       |   |            |         |                                  |        |         |   |                                            |         |                                                                             |        |          |   |           |        |      |        |           |   |        |        |   |        |           |   |
|       |   | $          | 6,121   |                                  | $      | 216,338 |   | $                                          | 24,173  |                                                                             | $      | 161,565  |   | $         | 27,359 |      | $      | 1,465,584 |   | $      | 11,692 |   | $      | 1,912,832 |   |
|       |   |            |         |                                  |        |         |   |                                            |         |                                                                             |        |          |   |           |        |      |        |           |   |        |        |   |        |           |   |

----

|   |                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    | Amounts exclude                        in-orbit incentives and associated interest. Also excludes payments to                        Boeing under vendor notes payable, as such amounts are included in the                        future payments related to debt. |

*Cash Flow*

***          Net            Cash Used in Operating Activities***. During the three months ended March 31,            2008, as compared to the same period in 2007, net cash used in operating activities            increased $7.7 million primarily due to increases in personnel, staffing and related            costs, and increased expenses to develop the next generation network.

                      ***Net Cash Used in Investing Activities***. During the three months ended            March 31, 2008, as compared to the same period in 2007, net cash used in investing            increased due to sales and maturities of investments, increased purchases of property            and equipment, and the payment of estimated taxes related to TMI Delaware in            2008.

                      ***Net Cash Provided by Financing Activities.*** During the three months ended            March 31, 2008, as compared to the same period in 2007, net cash provided by financing            activities increased primarily as a result of proceeds from the issuance of the Senior            Unsecured Notes of $150 million in 2008.

**Related            Parties**

          Prior            to their spin-off in October by BCE (which holds a significant interest in the            Company), Telesat and Infosat Communications were related parties through common            ownership by BCE. Through common ownership by the Apollo Stockholders, the            Company’s related parties also included HNS and Hughes Telematics, Inc. In April            2008, Harbinger acquired substantially all of Apollo’s interests in the            Company.

          Through            common ownership by Harbinger, the Company’s related parties also include            Inmarsat, TerreStar Corporation and TerreStar Networks. The Company’s related            parties also include LCC International Inc., which is controlled by a former limited            partner and former member of MSV GP’s Board of Directors. Certain of MSV’s            intellectual property was acquired by assignment from entities controlled by such            limited. In certain circumstances where the Company generates royalties from licensing            its ATC intellectual property to third parties, the Company may be required to share a            portion of such royalty payments with such limited partner and related entities. The            following table summarizes related party transactions (in thousands):

|                                                              |   |                                                                           |   |     |   |    |   |
|-------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|----------|--------|---------|--------|
|                                                              |   | **Three months                        ended                        March 31,** |   |
|                                                              |   |                                                                                |   |
|                                                              |   | **2008**                                                                       |   | **2007** |   |
|                                                              |   |                                                                                |   |          |   |
| Income, including                        management fees          |   | $                                                                              | 174    |     | $      | 695     |   |
| Expenses                                                          |   |                                                                           | 1,010  |     |   | 530     |   |
| Costs related to                        system under construction |   |                                                                           | 6,515  |     |   | — |   |
| Due from related                        parties, as of            |   |                                                                           | 217    |     |   | 391     |   |
| Due to related                        parties, as of              |   |                                                                           | 31     |     |   | 330     |   |

34

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|                               |                                                                                  |
|------------------------------------|---------------------------------------------------------------------------------------|
| **Item                        3.** | **Quantitative and                        Qualitative Disclosures About Market Risk** |

*Foreign Currency Exchange            Rate Risk*

          The            United States dollar is the functional currency for the Company’s consolidated            financials. The functional currency of the Company’s Canadian subsidiary and two            Canadian joint ventures is the Canadian dollar. The financial statements of these            entities are translated to United States dollars using period end rates for assets and            liabilities, and the weighted average rate for the period for all expenses and            revenues. During the normal course of business, the Company is exposed to market risks            associated with fluctuations in foreign currency exchange rates, primarily the Canadian            dollar and the Euro. To reduce the impact of these risks on the Company’s            earnings and to increase the predictability of cash flows, the Company uses natural            offsets in receipts and disbursements within the applicable currency as the primary            means of reducing the risk. When natural offsets are not sufficient, from time to time,            the Company enters into certain derivative contracts to buy and sell foreign            currencies.

          The            Company’s foreign currency management policy prohibits speculative trading and            allows for derivative contracts to be entered into only when a future foreign currency            requirement is identified. These contracts generally have durations of less than one            year. The Company accounts for derivatives in accordance with SFAS No. 133,            *Accounting for Derivative Instruments and Hedging Activities*, as amended, which            requires the recognition of all derivatives as either assets or liabilities measured at            fair value with changes in fair value of derivatives reflected as current period income            or loss unless the derivatives qualify as hedges of future cash flows. The Company has            not elected hedge accounting for any derivative contracts during the three months            periods ended March 31, 2008 and 2007, or at any other time over the past two years. As            of March 31, 2008, the Company held contracts of $5.1 million. The Company recognized a            gain of $0.1 million during the three months ended March 31, 2008 related to such            contracts.

*Interest Rate            Risk*

          Changes            in interest rates affect the fair value of the Company’s fixed rate debt. The            fair value of the Senior Secured Discount Notes at March 31, 2008 was $516.6 million.            The fair value of the Senior Unsecured Notes at March 31, 2008 was $123.9 million.            Based on balances outstanding at March 31, 2008, a 1% increase or decrease in interest            rates, assuming similar terms and similar assessment of risk by the Company’s            lenders, would change the estimated market value, of these investments, by $26.1            million and $27.3 million, respectively at March 31, 2008.

          The            Company does not have cash flow exposure to changing interest rates on its Senior            Secured Discount Notes or Harbinger Notes because the interest rates for those            securities are fixed. This sensitivity analysis provides only a limited, point-in-time            view of the market risk sensitivity of certain of the Company’s financial            instruments. The actual impact of future changes in market interest rates on Senior            Secured Discount Notes and Senior Unsecured Notes may differ significantly from the            impact shown in this analysis.

          The            Company has cash flow exposure to changing interest rates on its Vendor Notes because            the interest rate for these securities is not fixed. As of March 31, 2008 the Company            had $50.8 million outstanding under its Vendor Notes with interest rates tied to            changes in the LIBOR rate. Based on balances outstanding at March 31, 2008, a 1%            increase in interest rates, assuming repayment of the Vendor Note in accordance with            scheduled maturities, could add $0.6 million to the Company’s annual interest            expense.

35

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|             |                                               |
|------------------|----------------------------------------------------|
| **Item 4.** | **Controls and                        Procedures** |

          (a)            **Disclosure Controls and Procedures.** The Company’s management, with the            participation of the Company’s chief executive officer and chief financial            officer, has evaluated the effectiveness of the Company’s disclosure controls and            procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange            Act) as of the end of the period covered by this report. Based on such evaluation, the            Company’s chief executive officer and chief financial officer have concluded            that, as of the end of such period, the Company’s disclosure controls and            procedures are effective in recording, processing, summarizing and reporting, on a            timely basis, information required to be disclosed by us in the reports that the            Company files or submit under the Exchange Act.

          (b)            **Changes in Internal Control Over Financial Reporting.** There have not been any            changes in the Company’s internal control over financial reporting during the            three-month period ended March 31, 2008 that have materially affected, or are            reasonably likely to materially affect, the Company’s internal control over            financial reporting.

36

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**PART II -            OTHER INFORMATION**

|             |                                         |
|------------------|----------------------------------------------|
| **Item 1.** | **Legal                        Proceedings** |

                      The Company is involved in various legal proceedings arising in the normal course of            business. Although the outcomes of legal proceedings are inherently difficult to            predict, the Company does not expect the resolution of any currently pending matters to            have a material adverse effect on the Company’s financial position, results of            operations or cash flows.

|              |                                    |
|-------------------|-----------------------------------------|
| **Item 1A.** | **Risk                        Factors** |

The following risk factors            should be read in conjunction with the risk factors in our annual report on Form 10-K            for the year ended December 31, 2007.

*                 **Failure to comply with FCC and Industry Canada rules and regulations could damage            our business.***

          FCC            and Industry Canada rules and regulations, and the terms of our satellite            authorizations and ATC license from the FCC, require us to meet certain conditions,            such as satellite construction and launch milestones, maintenance of satellite coverage            of all fifty states, Puerto Rico, and the United States Virgin Islands and the            provision of an integrated service offering. Non-compliance by us with these or other            conditions, including other FCC or Industry Canada gating criteria, could result in            fines, additional license conditions, license revocation, or other adverse FCC or            Industry Canada actions.

In a September 2006 decision,            the FCC granted MSV authority to slightly exceed the 25% indirect foreign ownership            limit specified in the Communications Act. To comply with the amount of indirect            foreign ownership approved by the FCC, we must monitor the extent to which our stock is            owned or voted by non-U.S. citizens. The foreign ownership restrictions limit our            ability to be owned by non-U.S. citizens absent prior FCC approval. Exceeding the            amount of foreign ownership approved by the FCC in the September 2006 decision without            securing prior approval from the FCC may subject MSV to fines, forfeitures, or            revocation of our FCC licenses. In March 2007, we filed a Petition for Declaratory            Ruling with the FCC seeking approval for MSV’s level of indirect foreign            ownership. In October 2007, we provided additional information in response to the            FCC’s request for further ownership information regarding certain investors. On            November 6 and 26, 2007, we amended that filing. On January 25 and 29, 2008,            we further amended our filing to provide updated ownership information and to respond            to informal staff requests. On January 11, 2008, Harbinger tendered a petition to            the FCC seeking expedited action on a declaratory ruling to permit Harbinger to raise            their interest in the Company through open market share acquisitions to a level in            excess of that previously approved by the FCC. That petition was amended on            January 16, 2008, and MSV and the Company joined in the petition in a further            amendment submitted on January 17, 2008. On January 29, 2008, Harbinger            tendered to the FCC a petition seeking permanent authority to make the level of            acquisitions specified in their January 11 petition. On March 7, 2008, the FCC            issued an order granting the March 2007 and January 11, 2008 petitions. The grant of            those petitions was without prejudice to any enforcement action by the FCC for the            Company’s possible non-compliance with the foreign ownership rules prior to the            grant. The FCC did not act on Harbinger’s January 29, 2008 request for permanent            authority. We cannot predict when the FCC will do so or whether it will grant the            request. There is also no assurance that foreign persons or entities have not acquired            or will not acquire additional shares in the Company that may result in our exceeding            the level of foreign ownership approved by the FCC.

|   |                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ***Harbinger and                        its affiliates beneficially own a majority of our shares of voting common                        stock and, as a result, the trading price for our common stock may be                        depressed.*** |

          As            of April 9, 2008, Harbinger and its affiliates collectively owned an aggregate of            17,098,565 shares of our voting common stock, representing approximately 49.9 percent            of our outstanding common stock. In addition, as of April 9, 2008, Harbinger had the            right to acquire (i) an additional 442,825 shares of voting common stock, which shares            are being held in escrow pursuant to the terms of Harbinger’s agreement with the            Apollo Stockholders, and (ii) an aggregate of approximately 12.4 million shares of            voting common stock upon exercise of warrants. Harbinger and its affiliates also            beneficially own an aggregate of 20,580,940 shares of our non-voting common stock.            Harbinger also owns a significant interest in TerreStar Corporation, and therefore may            acquire a substantial number of additional shares of our voting common stock upon            TerreStar Corporation’s completion of its distribution to stockholders of            approximately 25.5 million shares of our common stock held by TerreStar            Corporation.

*                 **Harbinger and its affiliates can take actions that may be adverse to the interests            of other investors.***

          The            significant concentration of ownership of our stock by Harbinger and its affiliates may            adversely affect the trading price of our common stock because investors often perceive            disadvantages in owning stock in companies with controlling stockholders. Harbinger and            its affiliates have the ability to exert substantial influence over all matters            requiring approval by our stockholders, including the election and removal of            directors, amendment of our certificate of incorporation, and any proposed merger,            consolidation or sale of all or substantially all of our assets. In light of the            foregoing, Harbinger can significantly influence the management of our business and            affairs. This concentration of ownership could have the effect of

37

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delaying, deferring or            preventing a change in control, or impeding a merger or consolidation, takeover or            other business combination that could be favorable to investors. There can be no            assurance that the interests of Harbinger are aligned with other holders of our common            stock.

|             |                                                                                    |
|------------------|-----------------------------------------------------------------------------------------|
| **Item 2.** | **Unregistered                        Sales of Equity Securities and Use of Proceeds.** |
|             |                                                                                    |
| None.            |                                                                                    |
|             |                                                                                    |
| **Item 3.** | **Defaults Upon                        Senior Securities.**                             |
|             |                                                                                    |
| None.            |                                                                                    |
|             |                                                                                    |
| **Item 4.** | **Submission of                        Matters to a Vote of Security Holders.**         |
|             |                                                                                    |
| None.            |                                                                                    |
|             |                                                                                    |
| **Item 5.** | **Other                        Information.**                                           |

                  On            May 5, 2008, the Company and MSV entered into new employment agreements with each of            Alexander H. Good and Scott Macleod. The new agreements supercede and replace Messrs.            Good’s and Macleod’s prior employment agreements and change of control            agreements with MSV. A description of these new agreements is set forth            below.

*                  Mr.            Good*

                  Under            Mr. Good’s new employment agreement, he is employed as the Company’s Chief            Executive Officer, President and Chairman, as well as Chief Executive Officer and            President of MSV and Vice Chairman of MSV. In addition, during his term of employment,            the Company and MSV are required to nominate Mr. Good for election to their respective            Boards of Directors. Mr. Good’s employment agreement has a three-year term and            renews on a day-by-day, continuous basis. However, the remaining term may be modified            upon a majority vote of the Boards of Directors of the Company and MSV to be a            three-year fixed term with automatic two-year renewals unless either party gives            written notice at least 24 months prior to the term’s expiration that the term            will not be extended.

                  Mr.            Good’s annual base salary under his employment agreement is $625,200, and he is            entitled to an annual bonus payment equal to 100% of his base salary. The Boards of the            Company and MSV may, however, elect to pay a bonus to Mr. Good that is less than 100%            of base salary if the boards determine that Mr. Good failed to satisfactorily perform            objectives mutually agreed upon by him and the Compensation Committee, and, in some            circumstances, giving Mr. Good a reasonable period of time to cure such failure. The            Boards of the Company and MSV may also approve a bonus in an amount greater than 100%            of base salary if Mr. Good exceeds the Board’s expectations of his performance.            The agreement also provides that the Company and MSV will maintain life insurance for            Mr. Good in an amount equal to two times his annual base salary and accident/long-term            disability insurance at a level equal to 50% of his base salary.

                  Upon            termination of Mr. Good’s employment without Cause (as defined below) or upon Mr.            Good’s termination of his employment for Good Reason (as defined below), Mr. Good            will be entitled to the following:

|   |   |                                                                                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | a lump sum payment                        equal to two times the sum of his annual base salary and bonus at 100% of                        base salary; |
|   |   |                                                                                                                                                    |
|   | • | a pro rata bonus                        payment (at 100% of base salary) for the portion of the current year                        worked;             |

38

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|   |   |                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | continued coverage,                        at the levels then in effect, under the Company’s health care plans                        (or equivalent payments to cover Mr. Good’s COBRA premiums) for two                        years after termination; |
|   |   |                                                                                                                                                                                                                                                                  |
|   | • | continued payment of                        life and accident/long-term disability insurance, at the levels then in                        effect, for two years after termination;                                                                                   |
|   |   |                                                                                                                                                                                                                                                                  |
|   | • | payment of all                        accrued but unpaid payments and benefits; and                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                  |
|   | • | accelerated vesting                        of all Company and MSV options and restricted stock and continued ability                        to exercise options through the options’ original expiration                        date.                           |

                  Mr.            Good’s employment may not be terminated for Good Reason unless he provides the            Company and MSV with written notice stating the basis of such termination and the            Company and MSV fail to cure the action or inaction constituting such basis within 30            days after receipt of such notice.

                  For            purposes of Mr. Good’s employment agreement, the term “Cause”            means:

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |          (a)                        the willful and continued failure of the executive to substantially perform                        his duties with the Company and MSV (other than any such failure resulting                        from incapacity due to physical or mental illness), after a written demand                        for substantial performance is delivered to the executive by the Boards of                        the Company and MSV GP which specifically identifies the manner in which                        the Board believes that the executive has not substantially performed his                        duties;                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (b)                        the willful engaging by the executive in gross misconduct which is                        materially and demonstrably injurious to the Company or MSV;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (c)                        material breach of fiduciary duty to the Company or MSV that results in                        personal profit to the executive at the expense of the Company or MSV;                        or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (d)                        the executive is convicted of or pleads *nolo contendre* to a state or                        Federal felony, or the executive willfully violates any law, rule or                        regulation (other than traffic violations, misdemeanors or similar                        offenses) or cease-and-desist order, court order, judgment or supervisory                        agreement, which violation is materially and demonstrably injurious to the                        Company or MSV.                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          For                        purposes of Mr. Good’s employment agreement, the term “Good                        Reason” means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (a)                        a material diminution in the executive’s duties inconsistent with the                        executive’s position (including status, offices, titles and reporting                        requirements), authority, duties or responsibilities contemplated by the                        employment agreement, or any other action by the Company or MSV which                        results in a material diminution in any respect in such position,                        authority, duties or responsibilities, excluding for this purpose an                        isolated, insubstantial and inadvertent action not taken in bad faith that                        is remedied by the Company or MSV promptly after receipt of notice thereof                        given by the executive;                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (b)                        a change in the executive’s reporting from solely and directly to the                        Boards of the Company and MSV;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (c)                        a material reduction in annual base salary or a material reduction in                        annual bonus from the existing level of 100% of base salary;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (d)                        the Company or MSV requiring the executive to be based at any office more                        than 25 miles from the executive’s current office in Reston,                        VA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (e)                        a material diminution in the executive’s benefits as a result of the                        failure by the Company or MSV (i) to continue in effect any compensation                        plan in which the executive participates that is material to the                        executive’s total compensation, unless he has been offered                        participation in an economically equivalent compensation arrangement or                        (ii) to continue the executive’s participation in any such                        compensation plan on a basis not materially less favorable, both in terms                        of the amount of compensation provided and the level of the                        executive’s participation relative to other participants, than                        existed prior to such failure; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |          (f)                        the material failure by the Company or MSV to continue to provide the                        executive with benefits substantially similar to those enjoyed by the                        executive under any of the Company’s or MSV’s                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

39

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | pension, life                        insurance, medical, health and accident, disability or other welfare plans                        in which the executive was participating immediately prior to such failure;                        or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         (g)                        a material breach by the Company or MSV of the employment                        agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                  Mr.                        Good’s employment agreement provides that, immediately prior to a                        change in control (as defined below), the vesting of all Company and MSV                        options and restricted stock will be accelerated and, in the case of stock                        options, shall remain exercisable for their respective original                        terms.                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                  For                        purposes of Mr. Good’s employment agreement, the term “change                        in control” means any of the following:                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          (a)                        any person or group of persons (as defined in Section 13(d) and 14(d)                        of the Securities Exchange Act of 1934), but other than Harbinger Capital                        Partners or affiliated funds of Harbinger Capital Partners, together with                        its affiliates, excluding employee benefit plans, is or becomes, directly                        or indirectly, the “beneficial owner” (as defined in Rule 13d-3                        under the Exchange Act) of securities of the Company or MSV representing                        40% or more of the combined voting power of the Company’s or                        MSV’s then outstanding securities; |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          (b)                        the dissolution or liquidation of MSV or a merger, consolidation, or                        reorganization of the Company or MSV with one or more other entities in                        which the Company or MSV is not the surviving entity, or the sale of                        substantially all of the assets of the Company or MSV to another person or                        entity (excluding a merger of MSV into the Company);                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          (c)                        any transaction (including without limitation a merger or reorganization in                        which the Company or MSV is the surviving entity) which results in any                        person or entity (other than Harbinger Capital Partners or affiliated funds                        of Harbinger Capital Partners) owning more than 50% of the combined voting                        power of all classes of securities of the Company or MSV;                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          (d)                        in instances where Harbinger Capital Partners or affiliated funds of                        Harbinger Capital Partners own or control more than 50% of the combined                        voting power of all classes of securities of the Company or MSV, any                        transaction which results in a third party owning or controlling more than                        50% of Harbinger Capital Partners’ or affiliated funds of Harbinger                        Capital Partners’ combined voting power of all classes of securities                        in the Company or MSV; and                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          (d)                        individuals who at the beginning of any two-year period constitute the                        Board of Directors of the Company or MSV GP, plus new directors whose                        election or nomination for election by the Company’s stockholders or                        MSV’s partners is approved by a vote of at least two-thirds of the                        directors of the Company or MSV GP still in office who were directors at                        the beginning of such two-year period, cease for any reason during such                        two-year period to constitute at least two-thirds of the members of the                        applicable Board.                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                   A                        change in control does not include (i) an initial public offering by MSV or                        any successor thereto, (ii) the consummation of the conversion of MSV or                        its business into a corporation or (iii) any transaction resulting in                        SkyTerra’s ownership in MSV increasing.                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                   Mr.                        Good’s employment agreement requires the Company and MSV to make a                        “gross-up” payment to Mr. Good in an amount necessary to cover                        any excise tax imposed under Section 4999 of the Internal Revenue Code on                        payments to Mr. Good in the event of a change in control or if any other                        payments or benefits payable to Mr. Good under the employment agreement or                        otherwise are subject to such excise tax. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| *                  Mr.                        Macleod*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                   Under                        Mr. Macleod’s new employment agreement, he is employed as the Chief                        Financial Officer of the Company and MSV. Mr. Macleod’s employment                        agreement has a three-year term and renews on a                                                                                                                                                                                                                                                                                             |

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day-by-day, continuous basis.            However, the remaining term may be modified upon a majority vote of the Boards of            Directors of the Company and MSV to be a three-year fixed term with automatic one-year            renewals unless either party gives written notice at least 12 months prior to the            term’s expiration that the term will not be extended.

                  Mr.            Macleod’s annual base salary under his employment agreement is $390,750, and he            is entitled to an annual bonus payment equal to 75% of his base salary. The Boards of            the Company and MSV may, however, elect to pay a bonus to Mr. Macleod that is less than            75% of base salary if the boards determine that Mr. Macleod failed to satisfactorily            perform objectives mutually agreed upon by him and the Compensation Committee, and, in            some circumstances, giving Mr. Macleod a reasonable period of time to cure such            failure. The Boards of the Company and MSV may also approve a bonus in an amount            greater than 75% of base salary if Mr. Macleod exceeds the Board’s expectations            of his performance. The agreement also provides that the Company and MSV will maintain            life insurance for Mr. Macleod in an amount equal to two times his annual base salary            and accident/long-term disability insurance at a level equal to 50% of his base            salary.

                  Upon            termination of Mr. Macleod’s employment without Cause (as defined above in the            description of Mr. Good’s agreement) or upon Mr. Macleod’s termination of            his employment for Good Reason (as defined below), Mr. Macleod will be entitled to the            following:

|   |   |                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | a lump sum payment                        equal to the sum of his annual base salary and bonus at 75% of base                        salary;                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                    |
|   | • | a pro rata bonus                        payment (at 75% of base salary) for the portion of the current year                        worked;                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                    |
|   | • | continued coverage,                        at the levels then in effect, under the Company’s health care plans                        (or equivalent payments to cover Mr. Macleod’s COBRA premiums) for                        one year after termination; |
|   |   |                                                                                                                                                                                                                                                                    |
|   | • | continued payment of                        life and accident/long-term disability insurance, at the levels then in                        effect, for one year after termination;                                                                                      |
|   |   |                                                                                                                                                                                                                                                                    |
|   | • | payment of all                        accrued but unpaid payments and benefits; and                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                    |
|   | • | accelerated vesting                        of all Company and MSV options and restricted stock and continued ability                        to exercise options through the options’ original expiration                        date.                             |

                  Mr.            Macleod’s employment may not be terminated for Good Reason unless he provides the            Company and MSV with written notice stating the basis of such termination and the            Company and MSV fail to cure the action or inaction constituting such basis within 30            days after receipt of such notice.

                  For            purposes of Mr. Macleod’s employment agreement, the term “Good            Reason” has the same meaning as described above for Mr. Good under his employment            agreement, except that clause (b) in such definition refers to a change in the            executive’s reporting from solely and directly to Mr. Good (other than by reason            of Mr. Good’s voluntary termination, termination due to death or disability, or            termination for Cause).

                  Mr.            Macleod’s employment agreement provides that, immediately prior to a change in            control (as defined above in the description of Mr. Good’s agreement), the            vesting of all Company and MSV options and restricted stock will be accelerated and, in            the case of stock options, shall remain exercisable for their respective original            terms.

                  Mr.            Macleod’s employment agreement requires the Company and MSV to make a            “gross-up” payment to Mr. Macleod in an amount necessary to cover any            excise tax imposed under Section 4999 of the Internal Revenue Code on payments to Mr.            Macleod in the event of a change in control or if any other

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payments or benefits payable to            Mr. Macleod under the employment agreement or otherwise are subject to such excise            tax.

*                  Restricted            Stock Awards*

                  Messrs.            Good’s and Macleod’s new employment agreements provide that the Company            will grant them 600,000 and 400,000 shares, respectively, of restricted stock. Each            award will vest in three equal, annual tranches beginning January 1, 2009.

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|             |         |
|------------------|--------------|
| **Item 6.** | **Exhibits** |

|   |                                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1   | Certification of Alexander H. Good, Chief Executive Officer and President                        of the Company, required by Rule 13a-14(a) of the Securities Exchange Act                        of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of                        2002.            |
|   |                                                                                                                                                                                                                                                                                                               |
| 31.2   | Certification of Scott Macleod, Executive Vice President and Chief                        Financial Officer of the Company, required by Rule 13a-14(a) of the                        Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the                        Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                                                                                                                                                                               |
| 32.1   | Certification of Alexander H. Good, Chief Executive Officer and President                        of the Company, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to                        Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  |
|   |                                                                                                                                                                                                                                                                                                               |
| 32.2   | Certification of Scott Macleod, Executive Vice President and Chief                        Financial Officer of the Company, Pursuant to 18 U.S.C. Section 1350, as                        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                        2002.                                |

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**SIGNATURES**

          Pursuant            to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,            this Registrant has duly caused this report to be signed on its behalf by the            undersigned, thereunto duly authorized.

|                                     |   |                                                         |
|------------------------------------------|--------|--------------------------------------------------------------|
|                                     |   |                                                         |
| Date: May 5,                        2008 | By:    | /s/ Alexander H.                        Good                 |
|                                     |   |                                                              |
|                                     |   | Alexander H.                        Good                     |
|                                     |   | Chief Executive                        Officer and President |
|                                     |   |                                                         |
| Date: May 5,                        2008 | By:    | /s/ Scott                        Macleod                     |
|                                     |   |                                                              |
|                                     |   | Scott                        Macleod                         |
|                                     |   | Executive Vice                        President              |
|                                     |   | and Chief Financial                        Officer           |

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