Wireless carrier Sprint has called off its spectrum-hosting deal with would-be LTE operator LightSquared, citing unresolved disputes the latter had with the FCC.

The satellite portion of LightSquared’s operations has been nearly wiped out by government regulators, because it interfered with GPS signals. As part of the termination process, Sprint is returning $65 million it received as prepayments to LightSquared.

According to the deal signed in June 2011, Sprint was to build out a terrestrial network to support 4G LTE technology, making use of LightSquare’s 1.6 GHz spectrum licenses. LightSquared would have paid Sprint $49 billion in cash, $290 million of it upfront, over the course of 11 years, and offer the wireless carrier $4.5 billion in LTE and satellite purchase credits. In addition, Sprint could buy (and resell) up to 50 percent of LightSquared’s expected 4G capacity.

Sprint’s Move Is ‘In the Interest of Both Companies’

“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 impacting its ability to offer service on the 1.6 GHz spectrum,” reads a company statement. “However, due to unresolved issues, and subject to the provisions of the agreement, Sprint has elected to exercise its right to terminate this agreement.”

LightSquared acknowledged that Sprint’s move is “in the interest of both companies,” and hinted that the cash it receives from Sprint will give it more flexibility. Both companies would be willing to team up again should the regulatory situation change.

Sprint to Roll Out LTE by Mid-Year

Sprint says terminating this deal will not hinder its efforts to roll out LTE. “While unfortunate, termination of the agreement will have no impact on Sprint’s current customers and is not material to Sprint’s ongoing business operations. Network Vision remains on schedule and on budget, and we look forward to begin launching our 4G LTE network mid-year,” stated the carrier. Sprint is currently struggling to catch up with Verizon Wireless and AT&T in the 4G LTE market. Verizon Wireless’ LTE service is currently the most broadly deployed in the U.S., while AT&T is striving to catch up.

(reported by Alexandra Burlacu, edited by Wendy Li)