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LightSquared Inks Deal To Use Sprint Network

July 28, 2011

The beleaguered wireless startup LightSquared announced Thursday that it had signed a 15-year agreement with Sprint.

While expected, the deal nevertheless is good news for LightSquared, which has faced criticism amid mounting evidence that its plans for a nationwide wireless network will interfere with global positioning systems.

Under the agreement, LightSquared will pay Sprint nearly $14 billion in cash and credits over 11 years. Sprint will host parts of LightSquared's network on its spectrum and system. Sprint has the option of buying access to up to 50 percent of LightSquared's wholesale wireless network, which is based on both land transmitters and a satellite.

"This agreement gives LightSquared a rapid and cost-effective radio access network build," LightSquared Chairman and CEO Sanjiv Ahuja said in the announcement. The company expects to accelerate the process and save $13 billion in network construction and operating costs through the deal.

The announcement does little, however, to overcome the lingering questions. In a recently released report, the Federal Aviation Administration said interference from LightSquared's proposed network would be "far-reaching and potentially devastating to aviation."

Still, investment analyst Jamie Townsend predicted on Thursday that LightSquared would overcome the opposition.

"In our view this announcement is a very positive development for LightSquared and substantially increases the probability that the wholesale venture will succeed," he said in a statement. Townsend also noted that the deal will help Sprint provide next-generation 4G service.

Before LightSquared's network can become operational, it must be approved by the Federal Communications Commission, which is currently reviewing the plan.

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