In the wake of disappointing earnings this morning, Sprint Nextel announced that it is teaming with LightSquared on a 15-year spectrum hosting deal to provide LTE to its customers.
LightSquared, which is currently wrangling with the FCC over GPS interference issues related to the rollout of its satellite-based wholesale network, said the agreement will allow it to complete its 4G-LTE deployment more than a year ahead of the FCC mandate to cover 260 million Americans by 2015. In addition, it will achieve more than $13 billion of network capital and operating expense savings over the next eight years as compared to building a radio access network from scratch.
The deal includes a 3G nationwide roaming agreement with Sprint, which enables LightSquared’s wholesale customers to offer combined 4G/3G data services as soon as LightSquared launches its first 4G markets in 2012.
Sprint will receive about $4.5 billion in 4G-LTE and satellite purchase credits from LightSquared, allowing Sprint with the option for LTE.
LightSquare said that the LTE network will now be deployed first in major U.S. markets in the second half of 2012 and early 2013.
The agreement is subject to LightSquared’s obtaining resolution and FCC approval of certain interference issues involving terrestrial use of the L-Band spectrum.
“We believe LightSquared, in cooperation with the FCC and adjacent spectrum users, is taking proactive steps to address and resolve these issues in a timely manner,” said Steve Elfman, president of network operations and wholesale for Sprint, in a statement.
Dan Hays, partner with PRTM, a global management consulting firm, said the agreement presents significant benefits for both companies. “For Sprint, this will defray a significant portion of its planned capital investment and deliver increased cash flow while providing an opportunity to tap into LightSquared’s competitive 4G technology,” Hays said in comments provided to Wireless Week. “For LightSquared, this deal will dramatically reduce the cost and time required to deploy its nationwide, mobile broadband network to hundreds of millions of Americans.”
Hays believes the network hosting and sharing deal sets the stage for additional hosting opportunities for Sprint and that it could serve as a benchmark for future business model innovations in the wireless industry worldwide.
“In establishing the right to roam onto Sprint’s nationwide 3G network, LightSquared also gains immediate access to virtually ubiquitous coverage, enabling its retail distribution partners to commence broad nationwide launches from day one. This is a coup for LightSquared and will surely turbocharge its entry into the market,” Hays says.
The deal itself is made possible by Sprint’s Network Vision initiative, which aims to enable products and services that operate across multiple spectrum bands to operate through a single multi-modal base station.
Sprint says Network Vision allows the carrier to take advantage of new technology, chipsets and CDMA, CDMA-WiMAX and CDMA-LTE devices that operate in any of the 800 MHz and 1.9 GHz bands operated by Sprint, along with the 2.5 GHz band operated by Clearwire that offers WiMAX service and LightSquared’s 1.6 GHz spectrum that will offer LTE service.
In its second-quarter earnings release today, Sprint said the initiative will help improve its cost structure through lower roaming expenses, backhaul savings and economies of scale and provide added flexibility in how Sprint meets data and voice capacity demands in the future.