$7bn deal to build wholesale LTE network - updated

Nokia Siemens Networks has won an eight-year contract worth more than $7bn to build and operate a US LTE network.

Analysts say it could be the largest order ever placed in the mobile telecoms equipment industry.

NSN will build and operate the nationwide LTE network for Harbinger Capital's LightSquared venture.

The network is expected to use 40,000 cellular base stations and cover 92 per cent of the US population by 2015.

Analysts said the deal, and the acquisition of Motorola's network unit announced on Monday, would boost NSN in the North American market, where it generates around six per cent of its revenue.

"In the US, big operators have so far been sceptical to outsource their business," Hannu Rauhala, an analyst with Pohjola in Helsinki. "The deal is a great reference when this starts to change."

Dan Hays, a partner at management consulting firm PRTM, said: "It has the potential to be a watershed moment in the U.S. wireless industry."

LightSquared is not looking to sell services directly to consumers but plans to have other companies rent space on its network to offer its services.

Hays sees its customers potentially including Deutsche Telekom unit T-Mobile such as Wal-Mart and Best Buy could also show interest, Hays said.

LightSquared will become a direct rival to Clearwire, which is owned by Sprint Nextel and cable companies and has a similar strategy of renting space on its network to partners. Clearwire plans to have a network covering markets with 120 million people by the end of the year.

LightSquared plans to build its network faster than a regulatory requirement for it to provide coverage to 100 million people by the end of 2012.

"We expect this announcement to be perceived as negative for Clearwire in particular and wireless providers in general as there is investor desire for fewer, not more, players in the space," Wells Fargo Securities analyst Jennifer Fritzsche wrote in a note to clients. "We would note, however, that Harbinger is starting from nothing and it will take a long time before it has a presence in the market."

LightSquared named former Orange executive Sanjiv Ahuja as its chairman and chief executive, and said it planned to raise up up $1.75bn in debt and equity. Harbinger Capital Partners and affiliates have already invested $2.9bn in the venture. It claims building the network will create more than 100,000 direct and indirect private sector jobs over the next five years.

The deal is subject to final approval by both the Nokia Siemens Networks and the LightSquared boards.

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