Bloomberg News

Sprint Said to Be Close to $20 Billion LightSquared Accord

June 02, 2011

(Updates share price in penultimate paragraph.)

June 2 (Bloomberg) -- Billionaire Philip Falcone’s LightSquared Inc. is close to a deal to pay Sprint Nextel Corp. as much as $20 billion as part of a network construction and sharing accord, said two people familiar with the talks.

The tentative agreement, spanning 15 years, would allow Falcone to roll out LightSquared more quickly and let the companies share network-building costs, said the people, who declined to be identified because the discussions aren’t public.

Sprint has pledged $5 billion to upgrade its network over the next three to five years to allow it to use disparate bands of spectrum on a single base station. Chief Executive Officer Dan Hesse said in May he had held talks with Clearwire Corp. about possibly hosting its network on Sprint’s infrastructure.

LightSquared agreed last year to Federal Communications Commission conditions that it offer service to as many as 100 million Americans by the end of next year and 260 million by 2016. The company is on schedule to introduce commercial service by early next year, Jeff Carlisle, regulatory affairs executive vice president, said on a conference call yesterday.

Sprint would receive as much as $2 billion annually from LightSquared in the first stages of the contract to help pay for the network equipment and construction costs, said one of the people. Payments thereafter would vary annually based on the number of users on the LightSquared network and usage patterns, said the person. The full value of the contract will depend on those payments.

Audrey Schaefer, a LightSquared spokeswoman, and Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.

AT&T Talks

A deal between the companies may also give Sprint access to LightSquared’s spare network capacity, allowing it to save $240 million in annual costs, Jonathan Chaplin, a Credit Suisse Group AG analyst, said in a May 24 research note. He said the deal would be worth $1.2 billion a year in recurring revenue for Sprint.

LightSquared, based in Reston, Virginia, would need to raise an additional $3 billion to fully fund its buildout plan, on top of the $1 billion it has on hand, Chaplin said.

The company has also held talks with AT&T Inc. over a deal to buy network capacity from the carrier, two people with knowledge of the discussions said this week.

Sprint added 10 cents, or 1.7 percent, to $5.93 at 4 p.m. in New York Stock Exchange composite trading, for its highest value since October 2008. The shares have gained 40 percent this year.

LightSquared is backed by Falcone’s Harbinger Capital Partners hedge fund, based in New York.

--Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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