Blow to LightSquared’s Hope
Sprint Nextel Corp. has canceled a network-sharing agreement with LightSquared Inc., handing billionaire Philip Falcone his biggest setback since regulators grounded the wireless venture last month.
Sprint said it will return $65 million in payments it had received from LightSquared. In a separate statement, Reston, Va.-based LightSquared said the return of cash gives it “more flexibility” as it continues to push ahead toward its goal of creating a national wireless network.
The loss of Sprint adds to concerns about the viability of LightSquared and the future of Falcone’s $3 billion investment in the business through his hedge fund Harbinger Capital Partners. In February, the Federal Communications Commission rejected the venture’s network plan over concerns about signal interference. Harbinger managed about $4 billion at the end of last year, down from a peak of $26 billion in mid-2008.
“This is about as bad as it could get,” said Roger Entner, an analyst at Recon Analytics in Dedham, Mass. “First they are blocked by the FCC and now abandoned by Sprint. It’s the clearest sign yet that the wireless venture is doomed.”
Sprint had given LightSquared until last Thursday to get federal approval for its network. Under the 11-year agreement struck in June, Sprint and LightSquared would have shared network expansion costs and equipment to operate a high-speed network to compete with AT&T Inc. and Verizon Wireless.
LightSquared had originally agreed to pay Sprint $9 billion and issue an additional $4.5 billion in service credits in exchange for building and operating the network. The deal hinged on approval from the FCC to convert airwaves originally designated for satellite service to communications spectrum for land-based, or terrestrial, radio towers.
The FCC said last month it would block LightSquared’s planned network because of potential disruptions to global- positioning systems.Explore posts in the same categories: Uncategorized