TERMINATED: Sprint reimburses $65M to LightSquared

After product concerns, litigation, Sprint cancels contract to use 4G LTE services from LightSquared

Just days after word came out that LightSquared hired a legal team to go after the Federal Communications Commission, the company feels a striking blow when it loses its contract with Sprint.  All of these issues came about after the FCC filed complaints about LightSpeed's 4G wireless network and concerns that it would interfere with a large number of GPS devices. 

Sprint announced Friday morning that the telecom network had to back out of deal to use LightSquared services for its customers and elected to return $65 million in prepayments that LightSquared has made to cover Sprint's future costs.

“Sprint has been and continues to be supportive of LightSquared’s business plans and appreciates the company’s efforts to find a resolution to the interference issues impacting its ability to offer service on the 1.6 GHz spectrum,” Sprint said in a statement on Friday. “However, 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.”

Sprint said it remains open to a new deal when and if LightSquared resolves the interference issues.

The third largest wireless carrier ending its contract with LightSquared is yet another blow to the company that recently had to lay off 45% of their employees to reduce operating costs, and to support its regulation legal offensive.

“These regulatory delays are unfortunate because they will deprive the American people of the benefits of additional competition in the wireless industry,” said Doug Smith, chief network officer and interim co-chief operating officer of LightSquared in a statement.

The hosting agreement Sprint signed with LightSquared in June 2011 was an agreement to deploy and operate an LTE network capable of utilizing the 1.6 GHz spectrum available to LightSquared. 

Sprint Nextel served more than 55 million customers at the end of 2011.

Some of the major concerns that the FCC claimed it is block of the LightSquared network revolved around the possible interference its service had on a large number of aviation, commercial and consumer GPS devices and the FCC revoked LightSquared’s conditional permission to operate its network.

The company has hired Ted Olson, former Bush administration solicitor general, and Eugene Scalia, son of Supreme Court Justice Antonin Scalia, to help it overcome any regulatory setbacks and salvage its more than $4 billion investment in a new national wireless network.

When the original agreement between Sprint and LightSquared was reached back in October, it was stated that the forthcoming 4G LTE network would cover 120 different US markets by the end of 2012 -- with some of the markets gaining access by this summer.

As of Jully 2011, LightSquared had secured more than $2.3 billion in funding, including a summer investment of $265 million. 

Founded in 2010, LightSquared has embarked on an ambitious journey, aiming to become the nation’s first completely open, wholesale-only broadband network using Long Term Evolution (LTE), the most widely adopted 4G standard, to combine with one of the largest commercial satellites ever launched and thereby provide coverage to the entire U.S. The company’s overarching goal is to support mobile devices and enable users to develop innovative new applications that were previously limited by a lack of wireless connectivity in certain regions, particularly rural areas throughout the U.S.