LightSquared, the wholesale operator run by a hedge fund who has yet to even turn on their 4G LTE network, has signed a 15 year deal with Sprint whereby “LightSquared and Sprint will jointly develop, deploy and operate LightSquared’s 4G LTE network” according to Harbinger Capital Partners, adding “Sprint will become a significant customer of LightSquared’s 4G LTE network.” This piece of news, supplied by Bloomberg, has us scratching our heads so hard that our scalps are bleeding. First off, Sprint announced 2 years ago that they’ll no longer be managing their current network, instead they’ve outsourced that job to Swedish infrastructure vendor Ericsson. This is significant because LightSquared last year publicly stated that they’ve awarded Nokia Siemens Networks a $7 billion contract to build their wireless network. Why then does Sprint want to let someone else manage their network, yet also want to control how another operator builds their own network? Worse yet, the two networks are going to be managed by fierce competitors! Second, LightSquared has failed to prove that their network will actually work without knocking out GPS signals. If they don’t figure out how to fix that problem, and time is running out, then how exactly are they going to launch? Third, Sprint owns a little over 50% of Clearwire, who has a WiMAX network, and WiMAX isn’t compatible with LTE, so … can you see why we’re horribly confused?
Time will tell how all this will play out, but we view such a deal as a sign of desperation by Sprint, who knows full well that by Sprint 2012 AT&T will get the approval they need to take over T-Mobile. Once that happens, Sprint becomes a distance third in the operator game, and they’ll need to work even harder to convince customers that their network offers superior value for their dollar.
Again, we can’t stress this enough, in LightSquared’s current technical configuration, they can’t launch a network without obliterating GPS, which airplanes, cars, and your smartphone rely on to navigate.