Sprint Announces LightSquared Partnership, Posts Higher Loss


Credit: Sprint

Struggling mobile provider *Sprint* Nextel announced a 15-year partnership with LightSquared on Thursday, the wireless venture backed by billionaire Phil Falcone, to help build out its network and share equipment costs. Sprint (NYSE: S) hopes the deal will boost its flagging fortunes as it tries to compete with larger rivals Verizon Wireless (NYSE: VZ) and AT&T.

Per the terms of the LightSquared partnership, Sprint will build and deploy a nationwide 4G LTE network using L-Band spectrum available for LightSquared’s use. In return, LightSquared will pay Sprint as much as $9 billion in cash and $4.5 billion in credits over 11 years, which it can use to buy network capacity for LightSquared on a wholesale basis.

LightSquared faces intense opposition from the GPS industry after a report found that its network interferes with some satellite communications. On a conference call with analysts after the earnings announcement, Sprint CEO Dan Hesse addressed the issue.

“As a provider of GPS services, Sprint wants this issue to be resolved and we will not turn on the network until this issue is resolved,” Hesse said. Sprint has the right to terminate the LightSquared agreement if the GPS interference issues aren’t resolved by the end of the year, company officials said.

Sprint, the third largest wireless carrier after Verizon Wireless and AT&T (NYSE: T), added net 1.1 million subscribers in the quarter, driven by new pre-paid, wholesale and affiliate customers. But the company lost 101,000 subscribers on contract-based plans, far exceeding the 25,000 subscribers analysts had expected the company to lose. Company officials cited increased competition from Apple’s iPhone, which become available on Verizon — in addition to AT&T — earlier this year.

Hesse declined to comment on the potential competitive threat posed by the iPhone 5, which is rumored to be arriving in the fall.

Sprint’s struggles highlight the fierce competition in the mobile space. AT&T has proposed a $39 billion dollar merger with T-Mobile, which is currently under review by federal regulators. Sprint reiterated its opposition to the deal, saying it would stifle competition and innovation, and lead to higher costs for consumers.

Sprint posted a second quarter loss of $847 million, compared to a loss of $760 million one year ago, due to investment losses and higher tax expenses. The company lost 28 cents per share, significantly worse than the 12 cents per share that analysts had been expecting. Net operating revenue increased to $8.31 billion from $8.03 billion one year ago. Company shares fell as much as 8 percent in pre-market trading following the announcement Thursday.

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