Sprint Nextel has terminated its 15-year spectrum-hosting agreement with LightSquared, eliminating the would-be wholesale mobile operator's main carrier partnership even as the U.S. Federal Communications Commission seeks to shut down its network plans.
The deal, which the companies announced last July, called for Sprint to host LightSquared's controversial 1.6GHz spectrum on its Network Vision infrastructure, in effect letting LightSquared piggyback on Sprint's network and save itself US$13 billion over eight years. For this, LightSquared was to pay Sprint $9 billion in cash and grant it $4.5 billion worth of credits to use LightSquared's spectrum for its own services.
Sprint extended the partnership twice from its original termination date at the end of last year, and the deal expired on Thursday. In a statement on Friday, the fourth-largest U.S. mobile carrier cited the unresolved GPS (Global Positioning System) interference issues that have prevented LightSquared from receiving FCC approval for its LTE network. On Feb. 14, the FCC proposed steps that would shut down LightSquared's hybrid satellite-LTE network plan.
"We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues, as well as other interested spectrum holders," Sprint said. Sprint has returned $65 million in prepayments that LightSquared made to cover costs that Sprint never incurred. The companies had halted deployment design and implementation on the project late last year.
Sprint said its Network Vision rollout remains on schedule, with a Sprint LTE service launch set for the middle of this year, and the termination of the deal won't have a material effect on its finances.
In a statement, LightSquared said the cancellation was in the best interest of both parties, given the regulatory delays. The change will enhance LightSquared's working capital and give it more flexibility, the company said.
"Sprint has been a valued partner to LightSquared and we look forward to working together in the future," said Doug Smith, chief network officer and interim co-CEO, in the statement.
The deal with LightSquared was one component of a complex plan by Sprint to bring together enough spectrum to offer a robust LTE service. Sprint also plans to reuse spectrum currently devoted to other services and to coordinate its LTE plans with Clearwire, in which it is the biggest shareholder.
Clearwire currently supplies Sprint's WiMax 4G network, and it plans to build its own LTE network. Since the FCC acted to shut down LightSquared's LTE plans, two wholesale customers of the startup have signed agreements with Clearwire.
The cancellation did not come as a surprise, and analysts who have been watching Sprint closely said the company probably is better off now.
"It allows them to focus on spectrum that is truly available," said Monica Paolini of Senza Fili Consulting. The best way for Sprint to secure enough spectrum for a strong LTE service is to work with Clearwire, she said.
"The potential benefit of LightSquared to Sprint was the injection of capital and perhaps an improved negotiating position with Clearwire," said Tolaga Research analyst Phil Marshall.
In December, Sprint agreed to pay Clearwire as much as $350 million over two years for capacity on Clearwire's planned LTE network, which the company expects to have working by the middle of next year. The companies said they would identify areas with high mobile data demand where Clearwire's network could complement Sprint's.
This story, "Sprint cancels LightSquared LTE deal" was originally published by IDG News Service .