March 24, 2011

LightSquared To Offer Service Through Best Buy

Telecommunications startup LightSquared has inked a deal with electronics company Best Buy Co Inc, saying the deal will allow the retailer to resell access to that network, starting with a trial early next year, according to the service provider's chief executive.

LightSquared, founded by Philip Falcone, plans to offer wireless services on a wholesale basis to other companies such as Best Buy, which want to offer mobile services to consumers under their own brands.

Best Buy is the biggest customer to sign up with the telecom so far. The electronics retailer will sell the service under its own Best Buy Connect brand. Leap Wireless and Open Range have also signed up for LightSquared's LTE network, which is not yet up and running.

The network will rely on radio spectrum originally reserved for satellite use only, making it relatively cheap, but the company needs an extra $7 billion to build the network. It hopes by adding a big brand retailer it will be able to reach that goal more quickly.

LightSquared currently has a problem with its L-Band operations potentially disrupting GPS systems, making it more difficult to provide service to 100 million US citizens by the end of 2012. Fears of GPS failure have forced the telecom provider to set up a working party with GPS kit manufacturers to address the issue.

In order to reach the obligated 100-million customers, LightSquared is relying on its deals with Open Range and Leap Wireless to get it there. The deal works both ways. For example, a Leap customer roaming to LightSquared's network could also roam in to Open Range.

It also sees a possible deal with MetroPCS going a long way to getting LightSquared to its 100-million customer goal. Some experts expected a deal between the two to be announced at a CTIA conference today, but Ahuja announced the deal with Best Buy instead.

The Best Buy deal won't help LightSquared achieve coverage, but it will give confidence to investors, who have had concerns over the telecom's lack of big name customers, and the fact that company money was supposed to be in a hedge fund rather than invested in satellite communications.

LightSquared is basing its business on reselling its network capacity, and has recently gotten the FCC to agree that end users would not have to have satellite-capable handsets, despite the spectrum they use has been allocated for satellite use.

Without that agreement, it would have been unlikely for LightSquared to secure a deal with Best Buy, Leap Wireless or Open Range, as well as any other potentials. Even with the deals in place, the deals are subject to the telecom achieving its goals.


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