Sprint(s S) on Friday terminated its partnership with LightSquared, not only denying the would-be operator its biggest 4G customer, but also blocking LightSquared’s path to building an LTE network. LightSquared chances of ever getting its mobile broadband service off the ground were already bad enough, but now it’s faced with two seemingly insurmountable obstacles: overcoming regulatory and industry opposition to its LTE plans and finding either enormous sums of cash or a new partner to build its network.
LightSquared had planned to build a nationwide LTE network using its L-band satellite spectrum, offering up its capacity wholesale to other carriers and retail brands looking to launch their own 4G services. LightSquared, however, ran smack into the full force of the commercial GPS lobby and the protests of government agencies that claimed that the operator’s high-powered network would knock out millions of location and navigation devices using the nearby GPS band.
After several studies and a lot of public backbiting, the Federal Communications Commission sided with both the government and the GPS industry and denied LightSquared permission to roll out its network. LightSquared went on the offensive, challenging not only the FCC decision, but also the motives of government officials that advised the commission. According to Poltico, LightSquared has just retained some powerful legal muscle – a good indication it plans to take its case to the courts.
But Sprint’s decision only exacerbates LightSquared’s problems. Sprint had agreed to become LightSquared’s network outsourcer, building and managing its LTE systems as part of its Network Vision architecture. That deal would have saved LightSquared $13 billion on the cost of constructing and managing its own network, and it would have guaranteed LightSquared a big customer. But Sprint also imposed a deadline on LightSquared to solve its regulatory problems. That deadline expired on Thursday.
Here’s Sprint’s statement:
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. 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.
As part of their original agreement, LightSquared paid Sprint $310 million in advance for its hosting services. Sprint is returning $65 million. Those funds will help boost LightSquared’s rapidly deteriorating bank account. “For LightSquared, Sprint’s decision will enhance our working capital and provide more flexibility,” interim COO Doug Smith said in a statement.
In fact, Smith said that the termination of the agreement was in the best interest of both companies, allowing LightSquared to focus its energies and capital on overcoming its regulatory hurdles. “These regulatory delays are unfortunate because they will deprive the American people of the benefits of additional competition in the wireless industry,” Smith said.