Motorola Solutions says Airwave price controls unlikely to be effective this year

A ruling by the competition watchdog in the United Kingdom (UK) about the Airwave TETRA system is projected to cost Motorola Solutions more than $1 billion, but an SEC filing from the company indicates that the proposed price controls likely will not become effective until at least next year when the appeals process is complete.

Last month, the UK Competition and Markets Authority concluded its 18-month investigation, issuing a final decision that called for the implementation of price controls on the Airwave system that provides mission-critical voice communications to UK public-safety agencies. As outlined in the final decision, the new pricing plan would reduce Motorola Solutions’ projected revenues by more than 40% during the next several years.

In its Form 10-Q quarterly report filed with the SEC, Motorola Solutions acknowledged the CMA decision, reiterated its plans to appeal the CMA decision, and provided some estimates about the timeline for the appeals process.

“Subsequent to the quarter, the CMA issued its final decision which states it intends to impose a prospective price control on Airwave,” according to the Motorola Solutions (MSI) SEC filing. “MSI strongly disagrees with the CMA’s final decision and intends to appeal; the appeal process is expected to extend throughout 2023.

“Any price-control remedies ultimately imposed under the final decision issued by the CMA are expected to go into effect after a remedies order review and consultation period and following the completion of the appeal process with the UK’s 25Competition Appeal Tribunal (CAT). The remedies implementation could potentially be further suspended if the appeal process extends beyond the CAT.

“As a result of the issuance of a final decision from the CMA subsequent to our quarter close on April 1, 2023, we have tested our Airwave asset group for impairment, noting the assets are expected to be recoverable.”

Motorola Solutions conducted its quarterly earning call with analysts to discuss the company’s financial performance during the quarter that ended on April 1. During the unusually brief call with analysts that lasted slightly more than 30 minutes, no questions were asked about the Airwave situation.

If implemented as proposed by the CMA, the Airwave price controls significantly would dent Motorola Solutions’ revenue—and profitability—from the nationwide UK TETRA network that the company purchased in 2016. Despite this, there has been no negative impact on Motorola Solutions’ stock price to date. In fact, the Motorola Solutions stock price has increased 31.3% from Oct. 20, 2022—the day after the CMA released its provisional decision outlining its Airwave price-control remedy—to closing today at $290.41 per share.

During today’s quarterly earnings call, Motorola Solutions officials said the company achieved double-digit growth on a year-to-year basis in all three of its core technologies—14% in land-mobile-radio (LMR) communications, 17% in video security and access control, and 19% in command-center offerings.

“It was a great Q1 [first quarter], and I think it highlights the fact that what we do has never been more important,” Motorola Solutions Chairman and CEO Greg Brown said during the earnings call. “Both the demand environment and execution is really strong.

“As we exit Q1, I like our position. More importantly, I like our momentum—and this is despite the supply-chain challenges that will have to sort themselves through for the next several quarters … The intersection of public-safety and enterprise security is critical, and we’re building a safety and security technology ecosystem that connects public safety with private institutions. I couldn’t be more proud of this team, and I’m optimistic and enthusiastic about the opportunity in front of us.”