LightSquared, Sprint Cut $9 Billion, 15-Year Shared-Services Deal
July 28, 2011
RESTON, VA. and OVERLAND PARK, KAN.: LightSquared
and Sprint Nextel today announced a long-awaited shared services agreement. The
two have entered into a 15-year deal that includes spectrum hosting and network
services, 4G wholesale, and 3G roaming.
This spectrum hosting arrangement leverages Sprint’s investment in its multi-year
Network Vision plan. Under the agreement, LightSquared will pay Sprint to
deploy and operate a nationwide LTE network that hosts L-Band spectrum licensed
to or available to LightSquared. As a wholesale-only carrier with separate core
network operations, LightSquared can sell its 4G broadband capacity produced
through this spectrum hosting relationship to Sprint, other wireless carriers,
and retail partners.
Under the terms of the agreement, during an 11-year period, LightSquared will
make payments to Sprint of approximately $9 billion in cash for spectrum
hosting and network services as well as LTE and satellite purchase credits
which are currently estimated to be valued at approximately $4.5 billion. The
agreement also provides Sprint the opportunity to purchase up to 50 percent of
LightSquared’s expected L-Band 4G capacity. The wholesale purchase credits will
provide Sprint the option to obtain cost-competitive access to 4G capacity by
offsetting Sprint’s purchases of 4G capacity from LightSquared, should Sprint
elect to incorporate the L-Band LTE capability as part of its 4G offering.
This agreement is expected to lower network capital and operating expenses for
LightSquared by more than $13 billion over the next eight years in comparison
with the cost of a stand-alone network build. LightSquared expects the
deployment of the nationwide 4G-LTE network to be completed more than one year
ahead of the Federal Communications Commission mandate to cover 260 million
Americans by 2015.
Deal terms also allow LightSquared to use Sprint’s 3G network in areas where it
doesn’t yet offer 4G services. LightSquared’s wholesale customers will be able
to offer combined 4G/3G data services as soon as LightSquared launches its
first 4G markets in 2012.
“This agreement gives LightSquared a rapid and cost-effective radio access
network build,” said LightSquared Chairman and CEO Sanjiv Ahuja.
The agreement is subject to FCC approval, which is pending over issues related
to interference with global positioning systems. The commission’s docket on
Lightsquared has nearly 1,900 comments since it was opened June 30.
~ Deborah D. McAdams