Shares of Sprint Nextel Corp. and Clearwire Corp. each got a boost Wednesday from reports that Sprint is ready to pull the plug on its deal with LightSquared Inc.
Sprint’s strategy for providing faster wireless services includes tapping the wireless spectrum, or capacity, of both Clearwire and LightSquared.
LightSquared, however, has struggled to resolve regulatory objections based on technical problems with its proposed network. It also recently has lost its CEO, cut jobs and missed a payment to another partner.
Sprint is allowed – as soon as March 15 but no later than April 30 – to end the 15-year deal it signed with LightSquared last June.
Bloomberg News reported that Sprint will terminate the deal possibly next week. It cited two people who are familiar with the matter but asked not to be identified because the decision has not been made public.
Scott Sloat, a Sprint spokesman, declined to comment on the report.
LightSquared originally had until last December to secure regulatory approvals for its wireless service and the two companies pushed the deadline back. Sprint doesn’t plan more extensions, Bloomberg reported.
The deal would have LightSquared pay Sprint to deploy and operate a 4G network using Long Term Evolution technology and LightSquared’s spectrum. Sprint also would receive credits it could cash in for part of the network’s capacity to handle Sprint customer traffic.
Sprint currently provides 4G services on Clearwire’s WiMax technology network, and the LightSquared deal was seen as a challenge to their relationship.
“In the absence of other spectrum sources, we believe Sprint will continue to have to find ways to work with its main spectrum partner, Clearwire,” analyst Jennifer Fritzsche at Wells Fargo wrote in a note to clients.
Sprint shares rose 4 cents and closed at $2.43 after the morning Bloomberg report. Clearwire shares rose 10 cents and closed at $2.18.
In its annual report filed with the Securities and Exchange Commission, Sprint said it would have to repay $74 million of the $310 million it already has received from LightSquared under the deal.
The filing also said that Sprint’s ability to end the deal would be deferred to June 30 if LightSquared received consents from its lenders for changes to the agreement. Sprint’s right to terminate the deal would run through the end of 2012 if it were deferred.
Sprint’s deal with LightSquared marked a boost in the national network plans of Philip Falcone, of Harbinger Capital Partners that has invested $3 billion in LightSquared. Its undoing would further threaten Falcone’s vision of a new competitor to the major wireless network operators, Verizon and AT Inc.
Terry Neal, a LightSquared spokesman and Lew Phelps, a spokesman for Falcone, declined Bloomberg’s requests for comment.
Bloomberg also reported that Nokia Siemens Networks, the wireless-equipment venture of Finland’s Nokia Oyj and Germany’s Siemens AG, said it stopped work in 2011 on the network it was building for LightSquared.
“While we have a contract with LightSquared, they previously asked us to put our activities related to the network build on hold while they resolve” issues concerning the global- positioning technology, Nokia Siemens spokesman Ben Roome said by e-mail.
Falcone has said LightSquared would continue to pursue its plan of using using a satellite teamed with conventional earthbound cellular towers to deliver wireless service. Complaints have focused on claims of interference with GPS devices.
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