Airwave a 'license to print money' on legacy blue-light comms contract
Profits and revenue increase for Motorola subsidiary challenging regulator price cap ruling
Updated British emergency services comms supplier Airwave has posted increased earnings and profits after it challenged authorities seeking to cap its prices.
The Motorola-owned business is at the center of controversy in the UK after the Competition and Markets Authority (CMA) estimated it could make nearly £1.3 billion ($1.6 billion) in excess profits over a decade owing to its position as a supplier of the legacy network Airwave, which is set to be replaced by the Emergency Services Network (ESN), a project Motorola has also been involved in.
The latest figures released by the company – which supports the existing "TETRA" network used by police, fire, ambulance, and other services – show revenue rose to £463.4 million ($561.8 million) for the year ending December 2022, up from £437.8 million a year earlier. Profit rose to £176.8 million ($214.3 million) from £162.7 million the prior year.
The CMA has said Airwave's market position gave it the "ability to price services above levels the CMA would expect to prevail in a competitive market and results in a detrimental effect on customers."
It has proposed charge controls to limit the price by more than 40 percent. However, Airwave took the issue to the Competition Appeal Tribunal. The first hearing took place in early August, with a ruling to follow.
- 'There has never been a realistic plan' for UK's £11B Emergency Services Network
- Excess profits on Motorola's Airwave estimated to be £1.3B
- Up to £895M up for grabs in UK Emergency Services procurement
- UK emergency services take DIY approach amid 12-year wait for comms upgrade
To prevent the CMA from forcing it to sell Airwave, Motorola walked away from its £400 million ($485 million) contract for ESN in November 2021. The Home Office is going through procurement to replace Motorola on Lot 2 of the contract and expects to appoint a new supplier in 2024.
ESN is set to cost around £11 billion ($13 billion). It was initially expected to be up and running by 2019, but has suffered a series of delays and is now expected to be in place by 2029. The government argued that Motorola benefited from delays to ESN because it also provided the legacy system.
IT research company Megabuyte said the financial results showed Airwave was a "license to print money," boosted by its approach to cost indexation.
The analyst firm pointed out that the results could yet improve if the company wins its appeal against the CMA ruling. "It could generate as much again if all parties are correct in their assessment of when the replacement ESN might actually be ready," Megabuyte said. "The biggest scandal in all this is, of course, that the ESN is still nowhere near ready despite having consumed £2 billion in public funding, plus the excess costs of maintaining the Airwave contract."
Motorola has been offered the opportunity to respond. ®
Updated to add
"Airwave continues to deliver outstanding service for which it is paid a fixed price under a contract agreed with the Home Office," a Motorola Solutions spokesperson told The Register after publication.
"Motorola Solutions has continued to invest heavily (more than £1b since 2016) in Airwave's tried and tested TETRA technology and infrastructure to ensure it stays highly effective and reliable in keeping the UK's 300,000 emergency services users connected and its citizens safe. Airwave will continue to deliver excellent value for the UK's public safety agencies while ESN remains in development."