LightSquared's Wholesale LTE Network Challenges Clearwire's Dominance in 4G Wireless Services

As reported in Bloomberg's (News - Alert) business briefs on Monday, billionaire Philip Falcone’s LightSquared (News - Alert) plans to expand in as many as nine U.S. metro areas next year, challenging Clearwire Corp.’s lead in offering 4G wireless services.

The report shows that LightsSquared, backed by Falcone’s Harbinger Capital Partners hedge fund, will extend its network to Dallas, Chicago and Minneapolis in 2011, with plans to extend its reach to 11 additional cities by 2012, including New York, San Francisco and Los Angeles.

With a mission to revolutionize the U.S. wireless industry through the creation of the first-ever wholesale-only nationwide 4G-LTE (News - Alert) network, LightSquared’s documents show the company will offer 4G service largely in the middle of the country first and then expand to the coasts. While Sprint Nextel Corp. currently markets 4G through a venture with Clearwire, AT&T Inc. and Verizon Wireless are planning to enter the fray in the coming months.

In an interview given to Bloomberg, Steve Clement, an analyst with Pacific Crest Securities in Portland, Oregon, said, “It’s an ambitious plan. If these guys can get it up and running well, Clearwire (News - Alert) will have a reason to be concerned.”

Likewise, speaking to Bensinger in New York, LightSquared CEO Sanjiv Ahuja confirmed the content of the documents, adding that some specifics have changed since they were distributed late last year. Ahuja, who ran Orange SA in Europe, said he sees an opportunity to bring better and more innovative service to the United States.

Ahuja said that, “there is a big demand-supply gap and we are trying to step in and fill some of that.”

“In terms of wireless penetration, the United States today is nowhere near the top countries,” he added.

 Anyway, according to documents given to Bloomberg, Reston, Virginia-based LightSquared intends to add 300 base stations this year, with plans to add about 5,000 by the end of 2011. And, in 2012, LightSquared projects to add nearly 13,000 base stations in 11 more metropolitan areas. According to the company CEO, LightSquared is on track to begin constructing its network in December.

LightSquared, formed through Falcone’s acquisition of SkyTerra Communications Inc., plans to sell capacity on its network to cable providers, consumer electronics companies and technology companies. Consequently, a personal computer maker or television manufacturer could sell wireless service to the consumers while simultaneously selling their own products, said LightSquared.

As reported, and confirmed by a company spokeswoman, the first trials will begin in Baltimore, Denver, Las Vegas and Phoenix and the first commercial switch-ons are expected in the third quarter of 2011. Meanwhile, research data shows that Clearwire is now active in almost 50 markets, from large cities to suburbs, while Verizon plans to launch LTE services in 25-30 markets in the fourth quarter. Many smaller players, plus non-cellcos like the cable providers, may look to wholesale partners for their own 4G offerings, though flat rate specialist MetroPCS and cableco Cox (News - Alert) are going it alone, says Bensinger. Meanwhile, MetroPCS is expected to launch its first LTE services within weeks in Dallas and Las Vegas.

By 2015, LightSquared expects to cover at least 92 percent of people in the U.S. with its wireless broadband network, according to the company’s vision statement.