Sprint Nextel and LightSquared announced on Thursday a partnership intended to give both firms a jump-start on fourth-generation LTE wireless services.
The 15-year deal comes amid increasing concerns about the future of hedge fund billionaire Philip Falcone’s LightSquared, a satellite venture that has run up against complaints of interference by government and commercial GPS users.
Under the agreement, LightSquared will pay Sprint $9 billion in cash for 11 years for equipment and to host its spectrum. It will also give Sprint $4.5 billion in credits to purchase up to 50 percent of LightSquared’s spectrum capacity. That would allow Sprint Nextel, which already has a 4G WiMax network, to expand to LTE and better compete against giants Verizon Wireless and AT&T.
“This agreement gives LightSquared a rapid and cost-effective radio access network build,” said LightSquared Chairman and CEO Sanjiv Ahuja.
But questions remain as to how LightSquared will be able to use its satellite-based spectrum when the GPS industry — including aviation and defense officials — complain of interference.
Analysts say that while the agreement to share spectrum and network expansion costs appear to provide a boost to two firms trying to compete against giants Verizon Wireless and AT&T, many questions remain.
“Why did Sprint Nextel risk so much jumping into bed with LightSquared before they really get to know each other? This is an important questions that no one has answered yet,” said telecom analyst Jeffrey Kagan. “This not knowing confuses the marketplace, and that means customers, workers, investors, partners, everyone.”