According to a letter obtained by Bloomberg, LightSquared has entered into an agreement to supply Sprint with LTE 4G service for 15 years. The letter, from Philip Falcone, who is one of the mobile broadband provider's major financial backers, was written to other investors in the company and says that, "LightSquared and Sprint will jointly develop, deploy and operate LightSquared’s 4G LTE network. Sprint will become a significant customer of LightSquared's 4G LTE network." The deal is said to be valued at $20 billion and the two firms will share network expansion and equipment costs. This is not a total surprise as just the other day we told you that this deal was being talked about by both firms.
As we reported, LightSquared has been under fire for the interference that its LTE towers have been creating with GPS signals. A report is due at the FCC on July 1st about steps being taken to eliminate this problem. Other government agencies like the DoD and the FAA have stated LightSquared's technology will not work. The pressure is on for Falcone whose Harbinger Capital Partners hedge fund has invested more than 60% of its capital in the project. For Sprint, this deal gives them extra capacity to lessen the load on its network. According to Sprint CEO Dan Hesse, his company has been negotiating a similar deal with Clearwire, the company that currently provides 4G connectivity for the nation's third largest carrier. It is estimated that this deal could save Sprint a total of $240 million.
Chris Larsen, a Piper Jaffray & Co. analyst, says that before Sprint can take advantage of the extra network capacity offered by LightSquared, the latter will have to resolve its issues with the GPS interference. LightSquared also said that it will seek bids as soon as next week to sell service from its satellite to government agencies and other buyers. The satellite service would act as a back up to terrestrial based pipelines in case of emergencies that would prevent ground based networks from working.
source: Bloomberg/BusinessWeek via Phonescoop
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