Motorola Solutions CEO expects decision on UK Airwave appeal this year

Motorola Solutions anticipates that the United Kingdom (UK) Competition Appeal Tribunal will issue its decision this year in the appeal of a Competition and Markets Authority (CMA) ruling about the Airwave TETRA system that would cost the company about $200 million in annual revenue, according to CEO Greg Brown said.

Brown made the statement today during the critical-communication giant’s conference call with financial analysts to review the company’s strong performance during the third quarter that ended on Sept. 30.

Brown reiterated his belief that the CMA’s price-control ruling that could cost Motorola Solutions more than $1 billion during the next several years of anticipated Airwave operation is “unprecedented, overreaching and entirely disproportionate.” Representatives for the company made this argument before the Competition Appeal Tribunal (CAT) during a two-day hearing that was conducted in early August.

Some industry observers expected the tribunal to issue its ruling by now, but that has not occurred yet. However, Brown said he believes that a ruling will be released within the next several weeks.

“I would anticipate getting it [a decision from the CAT] certainly between now and the end of the year,” Brown said during the conference call with analysts.

“If it … does not go our way, we will continue to exhaust all legal options to defend the position we have.”

During its August quarterly call with analysts, Motorola Solutions said it would reduce its expected Airwave revenue for the rest of this year by $80 million to reflect the price-control impact during five-month period.

“We’re obligated to recognize that accounting consistent with the price control and final remedies order [about Airwave from the CMA], and we’re doing that,” Brown said.

“If there’s a different outcome [via the appeal to the CAT], then we would change that accordingly.”

Brown said the CMA price controls on Airwave would result in Motorola Solutions seeing an additional revenue decrease between $110 million and $115 million in 2024. With Motorola Solutions ending its role in the development of the LTE-based Emergency Services Network (ESN) in December, the company also will realize yet another $85 million revenue loss in 2024 from a contract dispute with the UK Home Office.

ESN was supposed to be completed in time to provide mission-critical communications to UK public-safety agencies by the end of 2019, which was when the Home Office’s original contract with Airwave was scheduled to expire. Instead, the ESN project has been the subject of multiple delays, with Home Office officials this spring expressing uncertainty about whether the public-safety broadband project will be finished by the end of this decade.

After almost two years of investigation, the CMA ruled this spring that Motorola Solutions should be subject to price controls for its operation of the Airwave TETRA network that provides mission-critical communications to UK public-safety entities. In June, Motorola Solutions filed an appeal of the CMA decision about the Airwave price controls to the Competition Appeal Tribunal, at which time the vendor giant provided the following statement:

“Motorola Solutions strongly disagrees with the CMA’s issuance of the remedies order while our appeal against the legal validity of the CMA’s final decision is being heard in the Competition Appeal Tribunal,” according to the statement. “The company is working to agree to the suspension of the implementation of the order until we receive judgment in our appeal of the CMA’s decision.

“The CMA has found no shortcomings in Airwave’s exceptional service, and Motorola Solutions will continue to vigorously protect its contractual position in delivering the Airwave network which the UK’s emergency services rely on every day.”

Motorola Solutions’ contractual position is based on the terms of a four-year extension for Airwave that it signed with the UK Home Office in December 2020, although the deal was not announced until the following month. Under that agreement, Motorola Solutions would have received more than $2 billion for extending the life of the Airwave TETRA system for four years, but the CMA order promises to change those finances dramatically.

“The CMA estimates that, as a result of the AEC, Airwave Solutions and Motorola Solutions can be expected to make total supernormal profits of around £1.27 billion [$1.628 billion, based on current exchange rates] from the operation of the Airwave Network between 1 January 2020 and 31 December 2029,” according to the CMA’s explanatory note about the order. “This is equivalent to charging almost £200 million [$256.4 million] per year more than the CMA would expect in a well-functioning market.

“The Report sets out the CMA’s decision to make an order … for the purpose of remedying, mitigating or preventing the detrimental effect on customers so far as it has resulted from, or may be expected to result from, the AEC.”