Wells Fargo’s Jennifer Fritzsche this morning reiterates an Outperform rating on shares of Sprint-Nextel (S), writing that news that the company may be ending its partnership with privately held broadband startup LightSquared is not really anything new, and that it “should not be seen as an additional negative surprise for Sprint shares.”
Bloomberg‘s Scott Moritz and Olga Kharif reported this morning that Sprint terminate its 11-year agreement with LightSquared, arranged last summer, as a deadline of March 15th approaches for approval of LightSquared’s network plans by the Federal Communications Commission.
LightSquared required permission to convert spectrum formerly used for satellite services into a terrestrial broadband network, which Sprint was to build in return for billions in payment.
Fritzsche thinks that while the breakdown is not entirely unexpected, nevertheless, if the deal does fall through, it means the company has to go hunting for more capacity, possibly pushing it further into the arms of long-time partner Clearwire (CLWR):
Where it could impact Sprint, however, is in terms of longer term spectrum needs. When the deal was originally announced, part of the agreement called for Sprint to be able to use LS spectrum for longer term as it moves to LTE. In the absence of other spectrum sources, we believe Sprint will continue to have to find ways to work with its main spectrum partner, Clearwire.
Indeed, Clearwire shares today are up 8 cents, or almost 4%, at $2.16.
Sprint shares are up 3 cents, or 1%, at $2.42.