Motorola Solutions is said to in the process of taking over Airwave, the provider of the UK’s emergency services communications network, in a deal worth close to £1 billion, according to a report today (13 November 2015) by Sky News.
The report claims that the deal requires the consent of the UK Government and also needs approval by the banks holding the company’s debt – principally HSBC and Lloyds Banking Group. Sky added that Motorola has seen off a rival bid by Hong Kong Telecom.
Rumours that Airwave was up for sale have been around for some time with. Airwave Solutions Ltd is owned by Guardian Digital Communications Ltd (GDCL), which in turn is wholly owned by the Australian investment firm Macquarie Group’s Macquarie European Infrastructure Fund 2 (MEIF II), which bought Airwave from O2 in 2007.
In June, sources close to the talks confirmed to Wireless that GDCL has been approached by a ‘number of credible parties potentially interested in investing in Airwave’. At least four bidders were said to have taken a serious look earlier in the year. An earlier Sky News report on 11 June mentioned Motorola, Hong Kong Telecom and possibly Vodafone.
Wireless understands that Motorola was ‘last-man standing’ at that time, but backed away. Recent industry speculation suggested that it was back in the frame - a view that the Sky story would appear to confirm.
Airwave comes with a considerable debt incurred from designing and building the Airwave TETRA network now used by some 300,000 police, fire and ambulance staff and other smaller users.
In March 2014, Bloomberg reported that GDCL won the backing of a UK court to extend £1.73 billion of loans used to buy 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. It also has a £50 million revolving credit facility, according to data compiled by Bloomberg.
The purchase of Airwave would provide Motorola with a huge amount of expertise in running mission critical networks. Motorola is the only bidder left for Lot 2 User Services contract in the Government’s £1.2bn Emergency Service Network (ESN) project, which aims to replace the narrow band Airwave TETRA two-way radio network with a 4G LTE one running on a commercial mobile network operator’s system.
That operator will be EE, as the carrier is the only bidder left for the Lot 3 Main Area Network contract following Telefonica O2’s decision not to submit a final bid. Airwave, Vodafone and UK Broadband Networks (a subsidiary of PCCW, the holding company of Hong Kong Telecom) were eliminated in February this year.
The appointment of Motorola and EE is expected ‘imminently’, although delays have been on-going given the original hope was to have preferred bidders on board before the May election. There is also speculation in the industry that the Government might be looking at an alternative arrangement following their official selection.
However, this might precipitate the contract having to go back out to tender again as it might contravene EU procurement rules. It might also leave the Government open to being sued by the unsuccessful bidders.
Sky News claimed ‘the Airwave sale process is being run by Lazard, the investment bank, while Deloitte, EY and Rothschild have all had roles in the process advising either the Airwave board or the company's lenders’.
Airwave and Motorola Solutions declined to comment.
What’s next for Airwave?