Sprint walked away today from a
multi-billion-dollar deal to host LightSquared’s spectrum on its network and
has returned $65 million in prepayments to the foundering company, whose
wireless plans are on the rocks because of problems with GPS interference. 

The abandoning of the contract comes
weeks after the FCC moved to block LightSquared from using its satellite
spectrum for its planned wholesale LTE network, a crushing blow for the
company. 

Sprint said the “unresolved
issues” with GPS prompted it to terminate the agreement.  

“We remain open to considering
future spectrum hosting agreements with LightSquared, should they resolve these
interference issues, as well as other interested spectrum holders,” Sprint
said in a statement. 

LightSquared agreed to pay Sprint $9
billion in cash and $4.5 billion in service credits over an 11-year period to
deploy and operate its LTE network on Sprint’s equipment.  

The end of the deal leaves LightSquared
without a partner to deploy the 40,000 base stations it planned to use for its
network – a strategy LightSquared said would save it $13 billion in operating
expenses. 

The companies stopped work on the
project late last year after it became clear that LightSquared was running into
rough waters, and Sprint in February granted LightSquared an extension until
mid-March to address the GPS issue, which it was unable to do.  

Sprint’s own plans to deploy LTE in 10
markets before the middle of this year are still on track, it said. 

LightSquared said Sprint’s decision
“is in the best business interests of both companies, and was not
unexpected given the regulatory delays.” Rumors surfaced last week that
Sprint was planning to end the network sharing arrangement.  

LightSquared has doggedly insisted it
will find a way to move forward, though it has given no clear indication on how
it plans to do so. Its main backer, Philip Falcone’s hedge fund Harbinger
Capital Partners, stands to lose billions if LightSquared fails. 

LightSquared is set to file a lengthy
defense of its network with the FCC today but has not yet released the
document. 

There are some indications that
LightSquared may go the legal route. It has reportedly retained two prominent
lawyers, one of whom successfully represented former President George W. Bush
in the Bush v. Gore Supreme Court case.