Investors in the LightSquared project got two pieces of news this week. One certainly will make them happy, but the other just as surely will fill them with a deep foreboding.
The good news is that the company, which is building a wholesale-only Long Term Evolution (LTE) 4G network, has agreed to work with Sprint in a 15-year deal focusing on the sharing of network expansion and equipment costs, according to Forbes. Forbes positions the deal as a competitive move as Sprint tries to keep pace with its two bigger rivals, AT&T - which is in the process of acquiring T-Mobile - and Verizon Wireless:
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.
That's the good news for LightSquared; it's needed and will play a big role in the rapidly expanding wireless landscape. Bloomberg also reports that Cox, which abandoned plans to build its own 3G network, is in talks with LightSquared.
The other piece of news, however, is not nearly as cheery: The spectrum that will be used by Sprint is being changed out. This is analogous to announcing plans for a high-performance sports car and then adding that a different type of engine will be used.
IT Business Edge's Ainsley Jones summed up the reasons last week:
It has been found that LightSquared's LTE broadband satellite system disrupts the GPS navigation systems used for aviation, military purposes and more. Tests conducted by the National Executive Committee for Space-based Positioning, Navigation and Timing (PNT) using LightSquared's equipment and tower receivers had a negative impact on GPS systems on land and in the air.
In the wake of the findings, the main backer, hedge fund Harbinger Capital Partners, announced that LightSquared will switch to different frequencies to avoid the problem. Reuters reports that Harbinger, which is led by Philip Falcone, already has spent $3.1 billion on the project. The report, which has good background, says LightSquared "still needs billions of dollars more" and may find it hard to raise it. It also may face delays due to the move. The general reporting on LightSquared doesn't say whether it is normal for a hedge fund to get so deeply involved in actually building things.
The unavoidable conclusion to all this is that LightSquared is in a state of flux. That's good and bad. The big players haven't nixed the concept and, indeed, many have signed. But changing technology horses in midstream clearly doesn't signal stability.