Sprint planning to end LightSquared deal?

07 March 2012 |

Sprint Nextel is planning to end its network sharing agreement with troubled telco, LightSquared, as early as next week, according to sources speaking to Bloomberg.

Sprint is expected to make the decision as the March 15 deadline approaches for LightSquared to meet certain conditions in its plans for a US LTE network using satellite spectrum.

The deal, “subject to LightSquared's obtaining resolution and FCC approval of certain interference issues involving terrestrial use of the L-Band spectrum,” now seems impossible following the FCC’s decision last month to revoke its conditional approval, allowing LightSquared to repurpose satellite spectrum.

Sprint had already been forced to extend the original deadline of December 31 2011 after LightSquared suffered previous setbacks last year. An investigation by the Department of Defense and Department of Transportation found that LightSquared’s use of its licensed spectrum band would cause “harmful interference” with the GPS network used by the aviation and navigation industries.

Under the terms of the 11-year agreement, which was finalised in July 2011, LightSquared is to pay Sprint $9 billion for spectrum hosting and network services and approximately $4.5 billion in LTE and satellite purchase credits.

LightSquared’s CEO, Sanjiv Ahuja, resigned last week following the FCC’s decision, and amid controversy surrounding his relationship with the Obama administration, after emails revealed LightSquared’s close contact with officials during the regulatory review of its LTE plans. It is rumoured that Timothy Donahue, ex Nextel CEO, is being considered as a replacement.

In what has proven to be a bleak quarter, LightSquared recently laid off 330 staff to save money. The company also failed to pay satellite company, Inmarsat, $56.25 million for the use of its spectrum.

Despite these setbacks, Philip Falcone, CEO and CIO of LightSquared’s largest investor, Harbinger Capital Partners, said last week that the company was still committed to finding a solution to its regulatory issues. He also said that LightSquared would take an aggressive approach to its finances to ensure that they would be adequate to support it through the regulatory issues.

In the wake of Ahuja’s resignation, Falcone was appointed as a board member at LightSquared. Chief network officer, Doug Smith, and CFO, Marc Montagner, are serving as interim co-CEOs until a permanent replacement is found.