Sprint Nextel and LightSquared recently announced a network-sharing deal, which will be used as a catalyst for the creation of a 4G network.
LightSquared will pay $9 billion in cash and $4.5 billion in credits for LTE and satellite equipment, according to the terms of the 15-year contract. In return, Sprint will provide network services and allow LightSquared roaming access to Sprint’s 3G network.
This agreement gives LightSquared the opportunity to start building a network without having to pay for most of the equipment. The company plans to develop a wholesale 4G LTE wireless broadband communications network for consumer electronics companies and telecommunications operators across America. LightSquared has previously faced issues in this attempt, specifically when the company proposed an LTE network that would operate on frequencies close to the GPS band, despite its interference with GPS receivers.
LightSquared believes the agreement with Sprint will allow the company to save $13 billion in capital investments and operating costs over the next eight years. The corporation says it now expects to offer service to 260 million people in the United States by the end of 2014, which is a year earlier than required under its licenses with the FCC.
This deal comes at a tough time for Sprint, which recently reported a loss for the 15th consecutive quarter. Sprint believes the deal will provide a new source of revenue, as the third-largest U.S. wireless carrier continues to compete against Verizon and AT&T. Already having promised $5 billion to upgrade its network over the next three to five years, Sprint can shift users onto LightSquared’s network as demands for data increase.