The lenders to US satellite/terrestrial venture LightSquared have approved a second lien on its spectrum, as part of a deal that will see it rent space on Sprint’s network, reports The Wall Street Journal.
The concession of a second lien on the spectrum…
The lenders to US satellite/terrestrial venture LightSquared have approved a second lien on its spectrum, as part of a deal that will see it rent space on Sprint’s network, reports The Wall Street Journal.
The concession of a second lien on the spectrum could potentially be an extra sweetener for Sprint, giving it added security, following talks that have reportedly been underway for months.
LightSquared is backed by hedge fund Harbinger Capital Partners, with JP Morgan and UBS acting as the main lenders.
The agreement would be advantageous to both companies. Sprint would receive cash and be able to use LightSquared’s spectrum. LightSquared, for its part, would be able to use Sprint’s network, thereby lowering the cost of building its own network.
Reports last week pointed to an eight-year deal, with LightSquared paying an annual US$2bn to use Sprint’s network.
In a research note released on 2 June, Credit Suisse analyst Jonathan Chaplin suggested the deal would involve US$2bn for the first couple of years to cover network deployment and then US$1bn a year for access to the network.
He suggested that LightSquared could give Sprint access to spectrum worth US$250m to US$500m.
Chaplin said it was likely that Sprint would go on to make similar hosting agreements with several players such as WiMax wholesaler Clearwire (in which Sprint holds a 54% stake), satellite broadcaster DISH, wireless consortium SpectrumCo and public safety services.
He also estimated that LightSquared had approximately US$1bn cash in hand at present, but that to make the deal meaningful to Sprint, “LightSquared still has to raise considerable capital”.
Any deal between LightSquared and Sprint could potentially complicate LightSquared’s current MoU with European vendor Nokia Siemens Networks.
Speculation has been mounting over recent weeks that LightSquared has been considering network-sharing deals.
The FCC has set the company a roll-out schedule, under which it must cover at least 100 million people with its terrestrial network by the end of 2012, 145 million by the end of 2013 and at least 260 million by the end of 2015.
A LightSquared spokesman told TelecomFinance that the company is still confident of meeting these targets.
In a blog post on Monday, LightSquared’s CEO Sanjiv Ahuja emphasised that his company would contribute US$14bn over eight years to build its nationwide broadband network.
LightSquared and Sprint declined to comment, while JP Morgan and UBS did not reply to questions.
