Motorola Solutions is said to be in ‘advanced talks’ to acquire Airwave Solutions, which owns and operates the UK’s TETRA emergency services communications network, according to a report by Bloomberg yesterday (18 August 2015).
The report suggested Airwave could be worth up to £1 billion, but noted that the deal may not come to fruition in part due to the complexity of Airwave’s shareholder structure. Motorola declined to comment on the report.
The company, which provides mission-critical communications solutions, was previously cited as a possible buyer by Sky News on 11 June 2015, when Airwave was said to be in possible talks with the likes of Motorola, Hong Kong Telecom and Vodafone.
At the time, sources close to Airwave’s owner Macquarie Group confirmed to Wireless that a ‘number of credible parties were potentially interested in investing in Airwave’.
Airwave Solutions Ltd is owned by Guardian Digital Communications Ltd (GDCL), which in turn is wholly owned by the Macquarie European Infrastructure Fund 2 (MEIF II), part of the Australian investment firm Macquarie Group.
The potential acquisition makes sense given the current situation with the UK’s £1.2 billion Emergency Services Network (ESN) contract, which is designed to replace the Airwave narrowband TETRA network with a broadband 4G LTE network from 2017. Airwave’s contracts with individual police, fire and ambulance services begin to expire in 2016 with the last ending in 2020. Hence, the UK Government’s requirement to go out to tender for a replacement.
The UK Government split the ESN contract into four lots. Motorola is now the only remaining bidder for the Lot 2 User Services network management contract following the decision by its only rival HP to withdraw from the bidding last month (July).
Buying Airwave, therefore, would provide Motorola with a huge range of services, expertise and experience in running mission critical networks, although it is less clear what it might do with the actual physical network infrastructure.
Airwave also comes saddled with considerable debt amounting to £1.73 billion. In March 2014, GDCL won the backing of a UK court to extend £1.73 billion of loans used to design, build and operate the Airwave network. It got approval to push back the maturity of the debt, due by 31 March 2014, by three years with an option for a further two years extension.
Guardian Digital has a £1.48 billion term loan A and £250 million term loan B, according to the company’s court filing at the time. It also has a £50 million revolving credit facility, according to data compiled by Bloomberg.
Whether Motorola would be able to acquire the company without taking on the debt remains to be seen. However, Motorola received a massive funding injection earlier this month, when it announced that Silver Lake Partners is to invest US$1 billion in the company. The funding will be used to develop partnerships, investments and for acquisitions.
Airwave was established in 2000 by what was then BT Group's mobile phone division, BT Cellnet, (later O2 and then Telefónica UK) to bid for the contract to fund, design, build, operate and maintain a dedicated communications network based on the Terrestrial Trunked Radio (TETRA) two-way radio standard for the UK’s emergency services.
In April 2007, Airwave was acquired by two Macquarie Group investment funds, Macquarie European Infrastructure Fund II (MEIF II - a €4.6 billion wholesale fund that invests in businesses that provide an essential service to the community) and Macquarie CPPIB Communications Pty Ltd, for $3.8 billion (£1.9 billion). Macquarie also controls Thames Water and National Car Parks under the MEIF II fund.
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