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LightSquared and Sprint, sitting in a tree, K-I-S-S-I-N-G
Record pre-pay card with $4.5bn on it issued
Sprint has agreed to run LightSquared's US Long Term Evolution (LTE) fourth-gen mobile network operation, in exchange for $9bn cash and roaming rights, while LightSquared customers will be able to use Sprint's 3G network in a deal benefiting everyone except Clearwire.
The deal runs for 15 years, and sees LightSquared paying Sprint $9bn in cash over the first 11 of those, to build and run the network. Sprint also gets $4.5bn in pre-paid credit on the LTE network, which is bad news for Sprint's existing 4G partner Clearwire.
LightSquared's increasingly-less-insane plan is to build a national 4G network using radio spectrum formerly reserved for satellite communications. When the company launched it reckoned such a network would cost $7bn to build, a figure which was greeted with some scepticism. But this deal gets LightSquared a national network for $9bn, which isn't far off the original figure, and well below the $25bn estimated cost of building a network from the ground up.
LightSquared hasn't got $9bn, but the payments will take place over 11 years and it should have the cash for the first few instalments, enough to get the network operating in some cities and prove the concept.
Sprint already has locations, complete with backhaul and supporting infrastructure, which makes the deployment much cheaper. LightSquared also gains a roaming arrangement which will allow it to claim national coverage, though that was supposed to be rendered unnecessary as the satellite was supposed to fill the holes.
The frequencies LightSquared is using were supposed to be just for satellite phones, and thus considered pretty worthless. But satellites don't reach everywhere, so the licences also permitted the satellite operator to run a few ground stations to stretch into buildings and between tower blocks (where line of sight to a geostationary satellite is hard to obtain). LightSquared has turned that around entirely, getting the rules changed so the ground component becomes central and the satellite is used to fill in the holes between cities.
The licence still requires that a satellite is available, but LightSquared successfully lobbied the FCC to remove the obligation that every device on the network be capable of communicating with it, so the deal to use Sprint's 3G network could be critical in gaining wholesale customers.
The deal doesn't cut Clearwire out entirely: LightSquared only has 10MHz of spectrum available until it can placate the GPS crowd, who have effectively driven the company out of its other 10MHz of bandwidth (which is too close to the GPS band). Sprint could decide to let its customers roam onto either LTE network – assuming it can find handsets capable of such a thing.
LightSquared now reckons it has everything in place to build and operate the network, and claims that it will be connecting people together in 2012. The plan that seemed impossible, or at the very least improbable, now looks as though it is going to go ahead, with only the diminishing cries of the GPS industry standing between the company and its revolution. ®