Sprint Nextel and LightSquared deal finalised

29 July 2011 |

In one of the big deals of the year, a 15-year agreement looks to change the face of US telecoms.

It might be one of the worst kept secrets in recent memory, but LightSquared and Sprint Nextel have finally publicly revealed the details of their spectrum hosting and network services agreement.

Under the terms of the agreement, LightSquared will pay Sprint to deploy and operate a nationwide LTE network that hosts its L-band spectrum.

There is still a crucial factor which will determine the ultimate viability of the deal, however. The agreement remains “subject to LightSquared's obtaining resolution and FCC approval of certain interference issues involving terrestrial use of the L-Band spectrum”. The ongoing feud between LightSquared and the US GPS industry has been causing speculation about the ultimate success of the LightSquared’s ambitions for some time now (see here).

At least Sprint’s president of network operations and wholesale, Steve Elfman, sounds positive about the outcome of the review, praising LightSquared’s “proactive steps” and expressing a hope that they will “resolve these issues in a timely manner”.

If all goes ahead, over an 11-year period LightSquared will pay Sprint approximately $9 billion for spectrum hosting and network services, as well as LTE and satellite purchase credits which are currently estimated to be valued at approximately $4.5 billion.
This is not an exclusive arrangement. As a wholesale-only carrier, LightSquared will be able to sell the 4G capacity produced through this arrangement to any wireless carriers, including Sprint, and to other retail partners. However, the agreement gives Sprint the right to purchase up to 50% of LightSquared’s L-band 4G capacity.

LightSquared has also entered into a 3G nationwide roaming agreement with Sprint.

“This agreement gives LightSquared a rapid and cost-effective radio access network build,” said Sanjiv Ahuja, LightSquared’s chairman and CEO. “With our next-generation satellite already operational and our independent core network build underway, LightSquared is now well positioned to meet the fast-growing market demand for wireless broadband services.

The agreement is expected to save LightSquared over $13 billion over the next eight years on the amount it would have spent on building the network alone.

The deal supports LightSquared’s intention to deliver “a nationwide network that will introduce world-class broadband service to rural and underserved areas”, according to Ahuja. LightSquared now expects the national 4G-LTE network to be completed more than a year in advance of the 2015 deadline set by the FCC.