Sprint backs out of deal with LightSquared

Sprint terminated its $9 billion deal with LightSquared on Friday as the wireless start-up fights regulatory opposition to its proposed 4G network.

"Sprint has been and continues to be supportive of LightSquared's business plans and appreciates the company's efforts to find a resolution to the interference issues," Sprint said in a statement. "However, due to these unresolved issues, and subject to the provisions of the agreement, Sprint has elected to exercise its right to terminate the agreement announced last summer."

Sprint said it is open to reconsidering the deal if LightSquared can receive regulatory approval for its network.

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Harbinger Capital's Philip Falcone has invested billions of dollars in LightSquared's plan to launch a nationwide mobile broadband service. Under the deal with Sprint, the two companies would have shared the cost of building thousands of cell towers.

But the contract was conditional on LightSquared receiving approval from the Federal Communications Commission (FCC). Sprint gave LightSquared several extensions, but the final deadline was March 15.

Although the FCC granted LightSquared a conditional waiver to move forward last year, testing has shown its network could interfere with GPS devices. After a review concluded there was no feasible way to fix the interference problem, the FCC said last month it would pull LightSquared's waiver and bar it from launching its network.

The company is trying to persuade the FCC to reconsider its decision. The deadline for initial comments on the FCC's proposal to block LightSquared's network is Friday.

In a statement, LightSquared said Sprint abandoning the deal is in the interest of both companies.

"For LightSquared, Sprint’s decision will enhance our working capital and provide more flexibility,” said Doug Smith, LightSquared's interim co-chief operating officer.

LightSquared is reportedly running low on cash, and pulling out of the deal with Sprint could free up money for a legal fight with the FCC.

In addition to avoiding the cost of the deal, Sprint said Friday it would repay LightSquared $65 million.

“Sprint has been a valued partner to LightSquared and we look forward to working together in the future,” Smith said.