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Sprint springs into bed with LightSquared

Clearwire invited to menage a trois?

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Sprint is to help LightSquared get its 4G network rolled out across America, and become a significant customer of that network too, according to documents seen by Bloomberg.

Those letters were sent out to LightSquared's shareholders, assuring them that Sprint was not only going to be a "significant customer" of LightSquared's wholesale network, but will also "jointly develop, deploy and operate" that network - making it rather more likely the thing will get built.

LightSquared declined to comment on the story, but Bloomberg reports that copies of the letter were sent to investors in the Harginber Capital Partners hedge fund - 60 per cent of which is now sunk into LightSquared. That letter describes a 15-year deal, with Sprint getting financially involved in building out the LightSquared network and promising to become a customer of that network once its been built.

LightSquared's investors have been getting nervous about the wannabe operator's ability to cover the USA with an LTE network, so one can understand the enthusiasm to spread the news. The nervousness is partly down to the lack of big-name customers, and partly scepticism about a plan that uses radio spectrum normally reserved for satellite operations.

LightSquared successfully lobbied the FCC for permission to use its satellite spectrum for a ground network, but since then has been under assault from GPS users who reckon the frequencies are close enough to knock out their positioning systems. LightSquared was required to create an investigative body to establish the truth of the matter, including reps from the GPS kit manufacturers. That body should have reported by June 15, but LightSquared got a two-week extension and now expects to reveal the extent of the problem come July 1.

Working with Sprint opens up a whole lot of new opportunities for LightSquared, not least making use of some of the frequencies owned by Sprint to help mitigate the GPS problems - Daily Wireless has a detailed breakdown of who owns what, and it's getting very complicated.

But having Sprint as a customer is equally, if not more, important. LightSquared has already announced some customers, including Leap Wireless and Open Range as well as Best Buy's MVNO, but nothing on the scale of the Sprint deal which Bloomberg pegs at a value of $20bn.

The deal would also seem to be bad news for Clearwire, which currently provides Sprint's 4G (WiMAX) service and is partly owned by Sprint. Clearwire is planning to switch to LTE, and Sprint is an assumed customer for that bandwidth. When rumours of a Sprint/LightSquared deal first emerged we dismissed them as a bargaining chip being used to get a better price out of Clearwire, but now it seems Sprint is taking that bargaining even further.

With Clearwire and LightSquared running competing LTE networks Sprint will be in a position to play one off against the other, on a day-by-day and perhaps even minute-by-minute basis. That would force the companies into a price war that neither can afford, to the benefit of Sprint. ®

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