CMA releases full decision costing Motorola Solutions more than $1 billion in Airwave revenue

Motorola Solutions’ Airwave TETRA network in the United Kingdom (UK) will lose more than $1 billion in expected revenue during the next several years, according to the full report from Competition and Markets Authority (CMA) detailing its final investigative decision.

Released last week, the CMA full report reiterated its plan to impose pricing controls—likely beginning in the middle of this year—on the Airwave network, which provides mission-critical communications to UK public-safety agencies. While this general decision was released earlier this month in the CMA’s summary, the full report details the exact revenues that Motorola Solutions can expect under the new charge-control regime.

Allowances detailed in an appendix of the full report calls for Motorola Solutions to receive 217 million pounds of revenue from Airwave in 2023 and reaching a high of 220 million pounds in 2024, then declining on an annual basis to a low of 204 million pounds in 2029. These revenue amounts are greater than the CMA proposed in its provisional-decision report last fall, when the UK competitive watchdog stated plans to limit Motorola Solutions revenues from Airwave to no more than 199 million pounds per year.

These base revenue allowances are subject to indexation and cost-sharing arrangements that will result in the final figures increasing, according to an appendix in the CMA final report. Even with these increases, the potential revenue Motorola Solutions would receive pales in comparison to the 400 million pounds of UK Home Office payments the vendor giant has received from operating the Airwave TETRA network in recent years.

“Once indexation is taken into account, the introduction of the charge control is expected to result in Airwave Solutions’ allowed revenue for 2023 being around £248 million, which is … [more than 40%] lower than the level forecast by Motorola for that year for the services included within the scope of the charge control,” according to the CMA appendix. “We will implement this remedy, which … also requires Airwave Solutions to provide certain information to support the operation of the charge control, via an Order.

“Once implemented, the effect will be that the existing pricing arrangements in the PFI Agreement are amended and supplemented, and Airwave Solutions will be required to comply with the charge control when setting its charges. The charge control will be applied to the remainder of 2023 on a forward-looking basis from the commencement date of the Order.”

Airwave revenues will be subject to the CMA price controls through 2029, although they will be reviewed in 2026, according to the final report.

In a statement provided to IWCE’s Urgent Communications, Motorola Solutions reiterated its opposition to the CMA findings and price-control proposal—a remedy that changes the financials terms associated with the four-year Airwave contract extension signed by the UK Home Office in December 2021 that became effective in January of this year.

“Motorola Solutions strongly disagrees with the CMA’s final decision and believes it cannot be justified on competitive, economic or legal grounds,” according to a Motorola Solutions spokesperson. “We will appeal the decision.

“In 2016, the Home Office negotiated and agreed to the fixed-price Airwave contracts, which were also provided to the CMA as part of the CMA’s approval of Motorola Solutions’ acquisition of Airwave. Despite the CMA finding no shortcomings in Airwave’s exceptional service, the CMA intends to forcibly reduce the contractually agreed pricing going forward. We believe this unprecedented overreach will have a chilling effect on long-term investment and contracting with the U.K. government.

“Motorola Solutions is committed to vigorously protecting its contractual position in delivering the Airwave network, an essential service that operates at the highest levels and is relied upon by the 300,000 emergency services professionals who protect communities across the U.K. every day.”

Motorola Solutions repeatedly has expressed its opposition to the CMA’s investigation and price-control proposal, particularly the portion that changes the terms of the four-year Airwave extension that the UK Home Office signed to cover the years 2023 through 2026. In addition, Motorola Solutions filings have noted that the competition rules cited by the CMA typically are not used to protect powerful government agencies like the UK Home Office as it signs contracts for the operations of a bespoke mission-critical network like Airwave.

Perhaps most notable, Motorola Solutions’ filings during the CMA investigation repeatedly have cited the fact that the CMA approved of Motorola Solutions purchasing the Airwave TETRA system in 2016. CMA officials have acknowledged approval of the Airwave deal in 2016 but repeatedly have noted that the action was taken when the UK government expected to switch public-safety communications to the ESN by the end of 2019.

Despite the fact that the UK Home Office signed the four-year Airwave extension with Motorola Solutions, the CMA claims that the vendor giant does not have a valid claim of “legitimate expectation” from the UK government, according to the CMA appendix.

“To the extent that Motorola uses the term ‘legitimate expectation’ as a reference to the public law concept of legitimate expectations, we consider its submissions to be without merit,” according to the CMA document. “This is because Motorola has not advanced a coherent argument that a public authority has, by a promise or practice, conferred on Motorola a legitimate expectation of a procedural or substantive benefit that would be frustrated by the subsequent action of that public authority in a way that would be so unfair so as to amount to an abuse of power.

“Any such argument necessarily fails because—even if the Home Office had conferred a legitimate expectation on Motorola—the charge control remedy is being imposed by the CMA, which has conferred no such expectation on Motorola.”

In its provisional decision that was released in October, the CMA proposed pricing regulations that would slash about $1 billion from the Airwave revenue that Motorola Solutions would receive under the current four-year contract—to be effective from 2023 through 2026–that was signed in December 2021 with the UK Home Office.

At the heart of the investigation is CMA’s determination that Motorola Solutions has been realizing “supernormal” profits from its Airwave contract extensions with the Home Office. To address the matter, CMA’s provisional decision proposes limiting Motorola Solutions’ annual revenue from Airwave to less than 200 million pounds—less than half of the 433.5 million pounds in revenue that Airwave reported in 2020.