The new LightSquared/Sprint deal is in the same vein as Sprint’s Clearwire deal, and will have no effect on the agreement with Kirkland based Clearwire. Sprint’s CFO said that it will maintain it’s wholesale relationship with Clearwire through the end of 2012 and might continue it indefinitely. Clearwire wasn’t so quick to embrace the LightSquared news:
“As the company that deployed the nation’s first 4G network, and as the largest 4G wholesaler in the world, Clearwire understands better than anyone the numerous technical and financial hurdles that must be overcome by any new service provider,”Clearwire said in a statement to FierceWireless. “We fail to see how the agreement announced today solves any of the significant problems facing LightSquared, such as its lack of usable spectrum for a 4G LTE network, its significant technical and regulatory problems, and its need to raise billions of dollars in additional funding to cover its obligations to Sprint…”
More after the break
Although it seems Sprint is satisfied with their arrangement with Clearwire, Clearwire has the most to loose in all of this. Sprint currently relies on Clearwire’s WiMax network to provide their 4G to customers. The Sprint/Clearwire partnership allowed Sprint to come out with “4G” service more than a year before any of the other three networks.
Clearwire’s buildout of their WiMax network came to an abrupt stop at the end of 2010. Clearwire had announced it had finished their proposed 2010 buildout and hasn’t announced any future markets or buildout plans since. Despite FierceWireless naming Clearwire’s financial head Hope Cochran as one of the top 5 female influencers in the Wireless Industry, Clearwire had just about run out of money at the end of 2010. At the same time a major executive change took place, including what appeared to be a forced resignation of company founder and industry pioneer, Craig McCaw.
Back in April Sprint announced that they’ve invested another billion dollar investment into Clearwire although this seems like a bandaid. Even with that $1 billion dollars secured, Clearwire has still not announced any new growth strategy.
As for their 4G/LTE deal, Sprint entered into a network hosting/sharing deal with Virginia based LightSquared. In this deal Sprint will provide 3G services for new LightSquared customers as they build out and start selling their network. Sprint will be able to sell their customers onto the 4G/LTE network as well. This reduces the overhead expense of building out a new network while leaving the cost of developing devices that allow Sprint’s CDMA and 4G/LTE to co-exist remains the responsibility of the OEMs.
HTC, Samsung, and LG have all been able to produce devices that work on CDMA and 4G/LTE, although even now the transition is slow and clunky. Motorola will release their first 4G/LTE device shortly and will upgrade their 4G/LTE tablet, the Motorola Xoom in September.
So What Happens to 4G/WiMax at Sprint
Sprint has said in their release today that everything will remain the same through 2012 as far as Clearwire is concerned. Sprint’s CFO also hinted at a possible “indefinite” extension of their agreement with Clearwire and we know that there are 4G/WiMax devices on Sprint’s current roadmap.
It seems silly to think that Sprint would offer both WiMax and 4G/LTE redundantly in the same areas. It would also be a daunting task (and expensive) to ask OEM’s to design devices that switched from CDMA to WiMax to 4G/LTE.
After talking off the record with several of our Sprint contacts and industry analysts we’ve built our own conclusion. Sprint will keep the WiMax network for the longhaul to support the customers who have purchased a WiMax device through the time that Sprint completes their first 4G/LTE rollout. In addition, Sprint will keep their WiMax network for business customers and M2M customers which make up 50% of Sprint’s business. Finally, they will open up the WiMax network to Sprint’s pre-paid business, which actually saw bigger growth than their post-paid unit last quarter.
All of this, in the entire story, is contingent on LightSquared demonstrating to the FCC that they will not interfere with GPS signals and getting FCC approval for terrestrial use of the L-Band spectrum.
The agreement, which was reported by various media outlets in mid-June, is subject to LightSquared getting FCC approval for the terrestrial use of the L-Band spectrum, which the GPS industry has been fighting against. “LightSquared will have to demonstrate that they will have at least 20 MHz of usable spectrum for the deal to proceed,” Credit Suisse analyst Jonathan Chaplin wrote in a research note “In addition, we estimate the company will need to raise $3 billion in additional funding. We believe this will be difficult until they demonstrate that the spectrum can be used for terrestrial purposes.” (source: FierceWireless)
, Sprint CEO Dan Hesse added Sprint “…will not turn on the network until this issue is resolved.