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. Also, for the first 11 years, 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 Sprint can use 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 lower cost wholesale access to LTE 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. Virtually all observers believe Sprint will do so.
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. That typically is an important capability, as there will be locations where the 4G signal, for any number of reasons, is not available. Though users will default to the 3G network, coverage will be significantly enhanced.
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. That typically is an important capability, as there will be locations where the 4G signal, for any number of reasons, is not available. Though users will default to the 3G network, coverage will be significantly enhanced.
The move does not mean Sprint is abandoning its WiMAX 4G network or services, only that it also is adding LTE capabilities in a significant way. That is expected to be important as it will allow Sprint to take advantage of LTE economies of scale in the handset area. Given the universal switch to LTE by the world's GSM carriers, handset manufacturers will have much more incentive to innovate in the LTE handset area, compared to the more-limited WiMAX space.
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