Sprint, Lightsquared Formally Announce 15-Year 4G LTE Deal (But Jury Still Out on Sprint LTE)
And now it’s official folks. After it was rumored that Sprint would formally announce their partnership with Lightsquared to build a 4G LTE network using Sprint’s spectrum today, Sprint’s gone and made it all official. The announcement was said to be made on the Sprint quarterly financial call today. Now that the actual press release has been given, we expect CEO Dan Hesse to dive into more details as far as what this means to the consumer in the long run.
Obviously we all want Sprint LTE devices to come to the network, but if this press release is anything to go by then Sprint isn’t thinking about putting the radios into handsets, tablets, netbooks and mobile connectivity devices right out of the starting gate. Understandable since so many of their consumers have already adopted WiMax-enabled phones.
Initially, the deal is to allow Lightsquared to build their network out over spectrum Sprint owns over an 11 year period, a privilege that will cost them $9 billion. On top of that, Sprint will get $4.5 billion in credit to access Lightsquared’s 4G services and will give Sprint first dibs to obtain 50% their L-Band 4G capacity.
The wholesale purchase credits will provide Sprint the option to obtain cost-competitive access to 4G capacity by offsetting Sprint’s purchases of 4G capacity from LightSquared, should Sprint elect to incorporate the L-Band LTE capability as part of its 4G offering.
Sprint has not fully committed to using Lightsquared’s services for their own network, however, as they merely say the “option” is there and that they’ll have “flexibility” in providing the needs of their customers in the “future”.
“This spectrum hosting agreement with LightSquared allows Sprint to more efficiently use its Network Vision platform,” said Steve Elfman, president of Network Operations and Wholesale for Sprint. “In addition to improving our cash flow, it provides additional options and flexibility in how we meet our customers’ future capacity needs.”
For Lightsquared, the ability to hitch a ride on Sprint’s 3G network to offer services not previously available to them is a sweetener. And they’ll have the ability to sell 4G services to consumers while cutting Sprint out as the middleman as Sprint decides whether or not they want to take advantage of this opportunity. Spectrum rental at its finest.
The deal is worth $20 billion overall and will go on for at least 15 years, say Sprint and Lightsquared. They are aiming to deliver services to 260 million consumers by 2015, meeting the FCC’s mandate of doing just that by 2016.
So there you have it. This doesn’t mean Sprint is deploying a 4G LTE network and selling services of their own, but it puts them in a great position to do so. And with competitors all riding the LTE train while WiMax is already seen as a dead end, we can’t imagine Sprint won’t exploit those exclusive options they have sometime in the future. Full press details ahead.
Sprint Nextel and LightSquared Announce Spectrum Hosting and Network Services Agreement
NEWS HIGHLIGHTS:
LightSquared enters into a Spectrum Hosting and Network Services Agreement with Sprint that is expected to result in substantial savings for LightSquared and accelerate completion of LightSquared’s nationwide 4G-LTE network
Sprint has option to purchase 4G capacity from LightSquared
LightSquared enters into a nationwide 3G Roaming Agreement with SprintRESTON, Va. & OVERLAND PARK, Kan., Jul 28, 2011 (BUSINESS WIRE) —
LightSquared(TM), the nation’s first wholesale-only integrated 4G-LTE wireless broadband and satellite network, and Sprint Nextel (NYSE: S) announced today they have entered into a 15-year agreement that includes spectrum hosting and network services, 4G wholesale, and 3G roaming.
This spectrum hosting arrangement leverages Sprint’s investment in its innovative, multi-year Network Vision plan. Under the agreement, LightSquared will pay Sprint to deploy and operate a nationwide LTE network that hosts L-Band spectrum licensed to or available to LightSquared. As a wholesale-only carrier with separate core network operations, LightSquared can sell its 4G broadband capacity produced through this spectrum hosting relationship to Sprint, other wireless carriers, and retail partners.
Under the terms of the agreement, during an 11 year period, LightSquared will make payments to Sprint of approximately $9 billion in cash for spectrum hosting and network services as well as LTE and satellite purchase credits which are currently estimated to be valued at approximately $4.5 billion. The agreement also provides Sprint the opportunity to purchase up to 50 percent of LightSquared’s expected L-Band 4G capacity. The wholesale purchase credits will provide Sprint the option to obtain cost-competitive access to 4G capacity by offsetting Sprint’s purchases of 4G capacity from LightSquared, should Sprint elect to incorporate the L-Band LTE capability as part of its 4G offering.
This agreement is expected to lower network capital and operating expenses for LightSquared by more than $13 billion over the next eight years in comparison with the cost of a stand-alone network build. LightSquared expects the deployment of the nationwide 4G-LTE network to be completed more than one year ahead of the Federal Communications Commission (FCC) mandate to cover 260 million Americans by 2015.
LightSquared has also entered into a 3G nationwide roaming agreement with Sprint. With access to Sprint’s 3G nationwide network, LightSquared’s wholesale customers will be able to offer combined 4G/3G data services as soon as LightSquared launches its first 4G markets in 2012.
“This spectrum hosting agreement with LightSquared allows Sprint to more efficiently use its Network Vision platform,” said Steve Elfman, president of Network Operations and Wholesale for Sprint. “In addition to improving our cash flow, it provides additional options and flexibility in how we meet our customers’ future capacity needs.”
“This agreement gives LightSquared a rapid and cost-effective radio access network build,” said LightSquared Chairman and CEO Sanjiv Ahuja. “With our next generation satellite already operational and our independent core network build underway, LightSquared is now well positioned to meet the fast-growing market demand for wireless broadband services with its wholesale-only integrated 4G-LTE and satellite network.”
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 Elfman.
About LightSquared
LightSquared’s mission is to revolutionize the U.S. wireless industry. With the creation of the first-ever, wholesale-only nationwide 4G-LTE network integrated with satellite coverage, LightSquared offers people the speed, value and reliability of universal connectivity, wherever they are in the United States. As a wholesale-only operator, LightSquared will deploy an open 4G wireless broadband network to be used by existing and new service providers to sell their own devices, applications and services – at a competitive cost and without retail competition from LightSquared. The deployment and operation of LightSquared’s network represent more than $14 billion of private investment over the next eight years. For more information about LightSquared, please go to www.LightSquared.com, www.facebook.com/LightSquared and www.twitter.com/LightSquared.
About Sprint Nextel
Sprint Nextel offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint Nextel served more than 51 million customers at the end of 1Q 2011 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; offering industry-leading mobile data services, leading prepaid brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Newsweek ranked Sprint No. 6 in its 2010 Green Rankings, listing it as one of the nation’s greenest companies, the highest of any telecommunications company. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
Forward Looking Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This news release includes “forward-looking statements” of Sprint and LightSquared within the meaning of the securities laws. The statements in this news release regarding expected financial savings, new technologies, networks, products, and potential interference issues, as well as other statements that are not historical facts, are forward-looking statements. The words “estimate,” “project,” “forecast,” “intend,” “expect,” “believe,” “target,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management of each of Sprint and LightSquared has made assumptions regarding, among other things, development and deployment of new technologies and networks; operating costs; efficiencies and cost savings of multi-mode technologies; customer and network usage; customer growth and retention; pricing; service, coverage and quality, including potential interference issues; and the timing of various events. Sprint Nextel and LightSquared believe these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. Sprint Nextel and LightSquared are not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this release. Sprint Nextel provides a detailed discussion of risk factors in periodic SEC filings, including its annual report on Form 10-K for the year ended December 31, 2010 in Part I, Item 1A, “Risk Factors,” and in Part II, Item 1A “Risk Factors” of its quarterly report on Form 10-Q for the period ended March 30, 2011.