It’s no secret that I have been skeptical of Harbinger Capital Partners and the newly named LightSquared’s chances when it comes to building a brand-new 4G wireless network, so I spoke last week with Sue Spradley, head of North America for Nokia Siemens Networks (NSN), to learn more about how it might all come together. NSN last week announced it had won a $7 billion contract to build out and manage the LightSquared network.
Spradley said her company had been talking with Harbinger for the last six months and said that when Qwest (s Q), a Denver-based phone company, pulled out as a partner for Harbinger, it didn’t really dent NSN’s confidence in the ability to get the deal done. However, the loss of a big strategic partner that could both buy access on LightSquared’s network and provide funds was a big blow to Harbinger’s plans according to sources who were evaluating the deal. She also confirmed what my sources had told me about the contract’s terms — namely that 51 percent of the $7 billion is for the capital expenditures, and that 49 percent is allocated for services. That means NSN is only spending a little more than $3.5 billion over the next eight years of the contract to build out the terrestrial portion of the network. Spradley declined to give further details on the contract.
That seems fairly cheap, given that analysts estimate Verizon (s vz) will spend $5 billion to $6 billion on its LTE rollout and Clearwire (s clwr) is spending from $3 billion to $6 billion to bring WiMAX to the masses. Still, Spradley wasn’t ruffled by LightSquared’s inexperience at building a network or having a business case beyond, “if you build it, they will come.” She said that France’s Free ISP had recently worked with NSN to build out an HSPA+ wireless network, which was the first foray into wireless for the ISP. However, LightSquared is very different from a wireline operator branching out into the wireless business. The company has operated a satellite business, but not very successfully as its financial reports prior to the Harbinger acquisition reveal.
Spradley said some of her confidence in LightSquared’s abilities stems from its choice of Baltimore as one of its test markets, because it’s a difficult city to build a wireless network in. Baltimore’s proximity to water (which mucks with wireless signals), huge amounts of federally sensitive airspace and the two major airports make coverage a challenge. For its initial phase, in addition to Baltimore, LightSquared will build networks in Phoenix, Denver and Las Vegas. LightSquared actually has until the third quarter of 2011 to cover 9 million people as per a plan Harbinger offered to the FCC in March.
Given that it’s still not clear how much money LightSquared raised as part of its recent financing round that could one day reach $1.75 billion, and that so far it doesn’t have a strategic investor that could lend expertise and possibly become an end customer of the to-be-built network, my skepticism is still alive, no matter how confident Nokia Siemens Networks may be.
Related GigaOM Pro content (sub req’d):