Sprint is teaming up with LightSquared to provide 4G service to its customers, allowing Sprint to compete better against AT&T and Verizon.
The Overland Park, Kan.-based carrier and Virginia-based LightSquared reached an agreement to share network-expansion and equipment costs to provide Sprint customers with 4G LTE service. The 15-year deal could be valued as high as $20 billion.
“LightSquared and Sprint will jointly develop, deploy and operate LightSquared’s 4G LTE network,” Philip Falcone, Harbinger Capital’s founder, which owns LightSquared, said. “Sprint will become a significant customer of LightSquared’s 4G LTE network.”
The agreement helps Sprint remain relevant in the U.S. wireless industry and provides a new source of revenue for the company that is already struggling to compete with Verizon and AT&T.
Sprint, which lacks high-end handsets other networks offer, including Apple’s popular iPhone, may have a more difficult time keeping pace if AT&T is successful in its bid to purchase T-Mobile from Deutsche Telekom for $39 billion.
The merger would allow AT&T to leapfrog Verizon and become the nation’s largest wireless network, leaving Sprint a distant third.
Sprint CEO Dan Hesse, which has been the loudest objector to the proposed merger, claims the merger would limit competition in the wireless industry, bringing the business back to the days of Ma Bell in the 1980s.
Sprint plans to use LightSquared to help bring its network to 4G LTE, an improvement from its current, and slower, WiMax network. The company has promised to spend $5 billion to upgrade its network over the next three to five years after losing contract customers in 14 of the past 15 quarters. An upgraded network may give subscribers an incentive to stay with the company rather than looking elsewhere for fast wireless speeds.
Sprint still has an uphill battle ahead of it. The company currently sits at third in the U.S., but if the merger between AT&T and T-Mobile is approved, could be even further behind. The deal with LightSquared should help Sprint improve its network and give customers a reason to stay, as well as attract new customers who cannot pay higher rates from the larger carriers.
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