Sprint Nextel (NYSE:S) officially ended its network-hosting agreement with LightSquared today--the first day it was contractually allowed to do so--but said it remains open to working with LightSquared as well as other interested spectrum holders in the future. Per the terms of the agreement, Sprint will repay LightSquared $65 million in prepayments LightSquared made to Sprint.
The termination of the deal was expected after regulators at the FCC effectively blocked LightSquared from launching its network. LightSquared was dealt a crippling blow last month when, based on testing evaluated by the National Telecommunications and Information Administration, the FCC said it would not allow LightSquared to build its planned wholesale LTE network due to GPS interference concerns. LightSquared has vowed to fight that decision and build its wholesale LTE network.
"Sprint has been and continues to be supportive of LightSquared's business plans and appreciates the company's efforts to find a resolution to the interference issues impacting its ability to offer service on the 1.6 GHz spectrum," Sprint said in a statement. "However, due to these unresolved issues, and subject to the provisions of the agreement, Sprint has elected to exercise its right to terminate the agreement announced last summer. We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues, as well as other interested spectrum holders."
Last year, Sprint and LightSquared struck a 15-year, network-hosting deal in which Sprint would have hosted LightSquared's 1.5 GHz L-band spectrum on its network infrastructure in exchange for $9 billion in payments and an additional $4.5 billion worth of service credits. However, work on the project was halted in December as concerns about LightSquared's regulatory troubles mounted.
For LightSquared, the loss of the Sprint deal is another blow to its image as a wholesale LTE provider. Clearwire (NASDAQ:CLWR) signed Cricket provider Leap Wireless (NASDAQ:LEAP) to a five-year LTE wholesale agreement earlier this week; Leap had been one of LightSquared's premier wholesale partners. Clearwire has also announced two agreements with companies that had signed deals with LightSquared: MVNE Simplexity and FreedomPop, which aims to provide mobile broadband on a freemium model.
LightSquared plans to file an official defense of its network with the FCC today, the last day that public comments will be accepted on the FCC's decision to rescind LightSquared's conditional waiver to launch its network. That waiver, which was granted in January 2011, was conditioned on GPS interference concerns being resolved.
In a statement Friday, LightSquared said the decision by Sprint was "not unexpected" and "in the best business interests of both companies." Doug Smith, chief network officer and interim co-COO of LightSquared, said that "Sprint's decision will enhance our working capital and provide more flexibility."
- see this release
- see this LightSquared statement
- see this WSJ article (sub. req.)
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