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Sprint Nextel to pull the plug on LightSquared partnership

Wireless giant plans to return $65 million in prepayments to the foundering wireless broadband effort over unresolved interference issues.

The bad news keeps coming for LightSquared.

Sprint Nextel plans to terminate its 15-year contract with the foundering wireless broadband effort on Friday and return $65 million in prepayments. The deal's cancellation--first reported by the Wall Street Journal--would leave LightSquared without a major partner for its effort to build a national wireless broadband network using satellite spectrum.

Sprint confirmed the cancellation, indicating that its move was a response to concerns that LightSquared's proposed network would interfere with other devices.

"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," the company said in a statement. "We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues, as well as other interested spectrum holders."

Representatives for LightSquared did not immediately respond to a request for comment

The move is just the latest in a succession of setbacks for the company. The Reston, Va., company suffered a possibly fatal blow in February when the FCC announced it would "suspend indefinitely" the startup's conditional waiver to operate after it was determined that LightSquared's interference with other devices, including GPS devices, was unavoidable.

While LightSquared vowed to fight on to win approval for the waiver from the FCC, the company's CEO, Sanjiv Ahuja, announced his resignation just two weeks later. That news followed the revelation that the company planned to slash its workforce by 45 percent to conserve cash.

However, the company's financial foundation has been in question lately too after it missed a scheduled payment to its satellite partner Inmarsat for spectrum it plans to use to build its network. Inmarsat said in February it hadn't received a $56.3 million payment from LightSquared.

Updated 3/16 at 8:30 a.m. with Sprint confirmation and comment.