Sprint ends accord with LightSquared

Overland Park-based Sprint Nextel Corp. canceled a network-sharing agreement with LightSquared Inc. on Friday, dealing billionaire Philip Falcone his biggest setback since regulators grounded the wireless venture last month.

Sprint said Friday it would return $65 million in payments it had received from LightSquared. In a separate statement, LightSquared said the return of cash gave it “more flexibility” to push toward creating a national wireless network.

Meantime, LightSquared, based in Reston, Va., complained to government regulators that they treated the company unfairly and were hindering a way to bring wireless broadband to rural America.

The loss of Sprint adds to concerns about the viability of LightSquared and Falcone’s $3 billion investment in the business through his Harbinger Capital Partners hedge fund.

It also all but shuts down hopes of Sprint having the satellite-ready company as a partner to share network construction costs. At one point their deal offered Sprint the potential of $9 billion in added revenue over the next 15 years. Sprint also held the possibility of $4.5 billion in service credits on LightSquared’s network.

In February, the Federal Communications Commission rejected the venture’s network plan over concerns about signal interference with satellite-guided navigation. The GPS industry, including Olathe-based Garmin Ltd., had lobbied against FCC approval for LightSquared’s plans. Government testing, disputed by LightSquared as inadequate, suggested the company’s network would jam some GPS receivers.

“This is about as bad as it could get,” said Roger Entner, an analyst at Recon Analytics in Dedham, Mass. “First they are blocked by the FCC and now abandoned by Sprint. It’s the clearest sign yet that the wireless venture is doomed.”

Sprint had given LightSquared until Thursday to get federal approval for its network. Under the agreement struck in June, Sprint and LightSquared would have shared network expansion costs and equipment to operate a high-speed network to compete with AT Inc. and Verizon Wireless.

Sprint said the termination wasn’t “material” to its business operations.

Shares of Sprint rose 3.2 percent to $2.89 at the close in New York. Another Sprint network partner, wholesale carrier Clearwire Corp., rose 5.6 percent to $2.27. LightSquared’s apparent demise would make the Sprint-Clearwire alliance that much more critical. Sprint owns a majority of Clearwire stock.

The Star’s Scott Canon contributed to this report.