Billionaire Philip Falcone’s LightSquared Inc. reached a 15-year deal with Sprint Nextel Corp. to share network expansion costs and equipment, and to provide high-speed wireless service to the phone company. Falcone told Harbinger Capital Partners hedge fund investors yesterday about the accord in a letter obtained by Bloomberg News. The companies were discussing a deal valued at as much as $20 billion, people familiar with the matter said earlier this month.
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“LightSquared and Sprint will jointly develop, deploy and operate LightSquared’s 4G LTE network,” according to the letter. “Sprint will become a significant customer of LightSquared’s 4G LTE network.”
The deal is an important step forward for Falcone, whose effort to challenge Verizon Wireless and AT&T Inc. was met with skepticism after plans for LightSquared emerged in government filings about 15 months ago. Falcone is gambling more than 60 percent of his hedge fund on LightSquared.
“This deal is a huge positive for Harbinger investors simply because it represents such a large proportion of his hedge fund,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “It’s a step in the right direction given all the uncertainty surrounding this investment.”
For Sprint, the deal would provide a new source of revenue as the third-largest U.S. wireless company struggles to compete with bigger rivals. AT&T is trying to acquire Deutsche Telekom AG’s T-Mobile USA unit, which would let it pass Verizon Wireless to become the country’s No. 1 wireless operator. Sprint Chief Executive Officer Dan Hesse is fighting to block the deal, which needs government approval, arguing it would stifle competition.
Sprint, which has lost contract customers in 14 of the past 15 quarters, has pledged $5 billion to upgrade its network over the next three to five years. The company can use LightSquared’s network to lessen the load on its own network as data demand has skyrocketed, an issue that has plagued other carriers.
