Sprint ends deal with LightSquared, returns $65 million

Sprint Nextel Corp. today exercised its option to back out of a partnership with trouble satellite/cellular company LightSquared Inc. and paid the company back $65 million.

The Overland Park-based carrier issued a

news release

this morning that made official what had looked increasingly clear — LightSquared’s difficult regulatory hurdles doomed the companies’ network-sharing plans.

“Due to these unresolved issues, and subject to the provisions of the agreement, Sprint has elected to exercise its right to terminate the agreement announced last summer,” the wireless company said in its release. “We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues, as well as other interested spectrum holders.”

That scuttles its $9 billion 15-year deal between LightSquared and Sprint.

A Wall Street Journal story is reporting that LightSquared would “file a defense of its network” at the Federal Communications Commission today.

LightSquared, which is based in Reston, Va., has struggled to resolve technical objections that regulators raised about its plan to use satellite signals along with cellular towers on the ground to deliver a faster wireless network.

The radio spectrum it has rights to is next to the radio frequencies used by satellite-guided navigation systems. Some government testing, contested by LightSquared, found almost inevitable jamming of those GPS receivers if LightSquared lit up its network. Garmin Ltd., headquartered in Olathe, was among those in the industry fighting against licensing for the LightSquared from the FCC.

LightSquared also has recently lost its CEO, cut jobs and missed a payment to another partner.

It had signed a contract with Sprint last June to deploy and operate the network, promising $9 billion as well as credits Sprint could cash in to use the network.

Sprint announced the deal with the proviso that LightSquared gain financing and resolve its issues that involve claims of interference with GPS signals. The two companies have extended the deal in the past.

In its annual report filed with the Securities and Exchange Commission Feb. 27, Sprint had said it could cancel the deal as early as today or as late as April 30. It said LightSquared would be able to defer Sprint’s ability to cancel until June if LightSquared’s lenders agreed to extend deal.

In canceling the deal, Sprint said it had returned $65 million in repayments LightSquared made to “cover costs that were not ultimately incurred by Sprint.”

Sprint had counted on LightSquared’s planned network to extend its own ability to provide customers with faster cell service using Long Term Evolution, or LTE, technology.

Sprint already is adding LTE during its own network upgrade. It plans to gain additional LTE capacity from Clearwire Corp., which is adding to its existing WiMax network that Sprint already uses for its current 4G speed service.

Yet in its announcement today, Sprint left open the possibility of teaming with LightSquared down the road.

“We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues,” Sprint said in its release. “While unfortunate, termination of the agreement will have no impact on Sprint’s current customers and is not material to Sprint’s ongoing business operations.”