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NSN relegated to LightSquared core vendor, outsourcer in wake of Sprint deal


Nokia Siemens Networks is taking a big pay cut from its original $7 billion contract with LightSquared (CP: NSN to ramp up U.S. operations in wake of $7 billion LTE deal). With the would be long-term evolution (LTE) operator’s network sharing deal with Sprint comes Sprint’s radio access vendors Ericsson, Alcatel-Lucent and Samsung. That trio will install the technology-agnostic base stations over which LightSquared’s network will ride (CP: Sprint confirms LightSquared tie-up, but no update on Clearwire plans).

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NSN isn’t losing the contract completely though. LightSquared’s chief marketing officer Frank Boulben confirmed that while NSN is on sidelines for the radio access network (RAN) build, it will remain LightSquared’s evolved packet core (EPC) and IP core vendor, supplying all of the gateways, routers and subscriber management and authentication, authorization and accounting infrastructure. NSN will also manage LightSquared’s core network operations under its previously negotiated outsourcing deal. LightSquared plans to deploy a flat IP network at first, but if its customers request a more sophisticated service delivery architecture, it will deploy NSN’s IP multimedia subsystem (IMS) gear, Boulben said, making NSN’s reduced contract with LightSquared more valuable.

“They will have everything beyond the radio and backhaul network,” Boulben said. “But yes, we will be indirectly using Sprint’s Network Vision vendors as part of the hosting deal.”

LightSquared is not revealing how much of a haircut NSN will take on their original $7 billion, 8-year contract, but the amount is bound to be significant. The lion’s share of a wireless network’s capital costs are gobbled up by the RAN, making the core a much smaller—though a growing—investment. That’s one of the primary reasons LightSquared entered into the network hosting agreement. Sprint is building a technology-agnostic architecture called Network Vision, off of which it can hang any radio network from any operator at any frequency.

By becoming a tenant on that network, LightSquared can save an estimated $13 billion in capital and operational costs over eight years, Boulden said. LightSquared will still pay to build and run the network—$9 billion over 11 years—but the network sharing deal will allow it to go to market much more cheaply and much more quickly, Boulben said. If LightSquared wins final approval from the FCC this fall to build its network as it hopes, it plans to have 260 million pops covered in 2014, a year earlier than originally projected.

NSN still has the network operations component of the network, which could wind up being a significant source of revenue. Ericsson’s outsourcing deal with Sprint is worth $4.5 billion to $5 billion. NSN’s share will likely be much smaller, though, since it is only operating LightSquared’s core network. Sprint, and indirectly Ericsson, will manage the LTE radio network.

The restructured deal has to sting NSN, though. Under the old terms, the LightSquared contract was the single largest in NSN’s history and it was the vendor’s only LTE deployment in the U.S., despite the vendor’s renewed focus in the North America region. Apart from a piece of Verizon Wireless’s IP Multimedia Subsystem (IMS) contract, NSN has failed to win any of the major LTE awards. The only carrier left is T-Mobile, a key customer of NSN, but if AT&T’s acquisition of T-Mobile goes through, AT&T will likely use its pre-selected vendors Ericsson and Alcatel-Lucent to build out as single high-bandwidth LTE network.

There’s a risk that NSN may even lose what remains of the LightSquared contract. There’s a cloud hanging over LightSquared’s deployment plans due to interference problems with the nearby GPS band. If LightSquared can’t resolve that issue to the FCC’s satisfaction, it will be forced to remain a satellite operator (CP: Sorting out the LightSquared GPS interference mess).


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