Sprint Nextel has given LightSquared another month to gain FCC approval for its planned 4G network, extending a deal in which LightSquared would use Sprint's Network Vision infrastructure and save an estimated £8.3 billion (US$13 billion) in deployment costs.
The 15-year partnership agreement, announced in July, had been scheduled to expire on 31 December 2011 if LightSquared did not receive approval from the US Federal Communications Commission to provide a nationwide LTE (Long Term Evolution) mobile data service. Concerns over interference with GPS have put that approval in jeopardy.
Sprint's Network Vision system will be a national network designed to support multiple wireless technologies. Under the July deal, Sprint would host LightSquared's spectrum on its network in exchange for £5.8 billion ($9 billion) in cash and the option to use some of LightSquared's capacity itself. The companies have said this arrangement would reduce LightSquared's costs by £8.3 billion over eight years versus building its own physical network.
Agreement still in place
On Tuesday, Sprint said the agreement is still in place and the 30-day extension granted to LightSquared won't affect Sprint's deployment schedule for Network Vision. The network is scheduled to reach 120 million US residents by the end of this year and 250 million by the end of 2013, when it would be complete.
LightSquared now has until the end of January to earn permission from the FCC to offer the LTE service. But with growing attacks on its plans by some GPS vendors and another round of interference tests yet to come, the chances of making even that deadline appear slim.
If the company doesn't make major changes to its plan for use of the spectrum, it will be hard-pressed to get that plan approved, said analyst Roger Entner of Recon Analytics. And if LightSquared makes big changes, it would have to start from scratch in getting the new plan approved, he said.
Network Vision coming anyway
However, the newest Sprint deadline may not be set in stone, Entner added. Sprint will be building Network Vision anyway, and the expected revenue from LightSquared would be nice to have, though not crucial to building the system, he said. So the deadline might continue to shift.
"It doesn't cost them anything to extend the deal with LightSquared," Entner said.
Also on Tuesday, LightSquared announced it had hired a new chief financial officer, Marc Montagner, who previously was vice president of sales, marketing and strategy for SkyTerra, the satellite company that was LightSquared's predecessor. The previous CFO, Michael Montemarano, left LightSquared on 18 November under a previous mutual agreement between Montemarano and the company.
In addition to his experience at SkyTerra, Montanger once was senior vice president of corporate development and mergers and acquisitions for Sprint. He was responsible for the merger of Sprint and Nextel into a single, £45 billion ($70 billion) carrier in 2004, according to LightSquared.