Has LightSquared Found a Better Way?
The buzz in the industry is that LightSquared and Sprint (NYSE:S) are in discussions that would allow LightSquared to use Sprint cell sites to deploy its 4G network. This has potential to be a much faster and cheaper method to deploy the LightSquared network, but there are significant obstacles to this approach.
The typical way a new entrant deploys a wireless network is to start the network design with existing cell towers, and then fill in the holes with rooftops, water tanks, and even new tower builds. LightSquared appears to be using its wholesale strategy of selling 4G network capacity to explore an alternative approach. According to unnamed sources – with a “no comment” from LightSquared – LightSquared is negotiating with Sprint to use Sprint cell sites for its deployment.
I applaud this creative approach which could remove 4-6 months off the deployment schedule for each cell site. This approach would certainly provide a very strong tie to a LightSquared primary customer target as well. If an agreement is struck, this will not be a silver bullet, however, due to several factors.
First, Sprint only owns a handful of cell towers due to its sale of towers to tower companies. This means that LightSquared will be placing equipment on tower company and other carrier owned towers. Many of these towers are near or at full capacity from both a vertical real estate and structural loading capacity. Second, for each site, the collocation agreement will likely involve three parties – Sprint, LightSquared, and the tower owner. Second, LightSquared owns spectrum and is required to deploy a network in that spectrum range – not in Sprint’s spectrum. This means that LightSquared will be using its own equipment purchased from Nokia Siemens Networks (NSN). Finally, once these complex Master License and Site License Agreement issues are ironed out, LightSquared will still be deploying equipment which will involve mobilizing construction and installation vendors across the entire nation.
It will be interesting to see if a deal is truly in the works, and what the exact details will be. My analysis of the current speculation about a deal between LightSquared and Sprint is that it will indeed be a faster and less expensive means to deploy a 4G network. However, I only see the improvement in both areas to be in the 15-25% improvement range.