Telefónica UK (O2) is understood to have pulled out of the bidding for the Government’s £1.2bn Emergency Services Network (ESN) project, leaving EE as the sole bidder for the Lot 3 Mobile Services main area network contract, according to a report published today (8 June 2015) by the Government Computing Network website.
The chief cause behind Telefónica’s decision is cited as being the current upheaval in the UK mobile operator market where Telefónica UK will potentially be acquired by Three UK’s owner Hutchinson Whampoa, while BT is seeking to buy EE.
Sources in the critical communications market have previously speculated to Wireless that these kinds of major structural changes in the mobile phone market might make it difficult for the operators involved to concentrate on their ESN bids and this concern now seems to have been realized with Telefónica.
The Government’s Emergency Services Mobile Communications Programme (ESMCP) team, which is running the ESN project from the Home Office, originally shortlisted five bidders for the Lot 3, but Airwave, which runs the current TETRA emergency services network, Vodafone and UK Broadband Networks were eliminated in February 2015. This left just EE and Telefónica to return best and final offers, which were due back in the middle of this month.
Unless the Government delays the project and invites one of the eliminated companies back, it now has no competition for Lot 3. It already faced reduced competition for the Lot 2 User Services, when only Motorola Solutions and HP were prepared to bid, while the other three shortlistees declined to submit a tender. Four bidders remain for the Lot 1 Delivery Partner contract.
According to a statement given to Government Computing Network, Telefónica said: ‘Telefonica UK has taken an active and successful part in the government's on-going tendering process for the running the UK's new Emergency Services Network (ESN).
‘The potential restructuring of the UK telecoms market as a result of current M&A activity affecting several players in the industry raises questions about spectrum (both current holdings and timings of access to future spectrum), network sharing arrangements and specifically in our position the proposed potential acquisition of O2 in the UK by Hutchison Whampoa.
‘We are therefore unable, at this time, to provide the detail and commitments required to continue into the next stage of the bidding process put forward by government. We have taken the decision to notify the 'Authority' that we will immediately withdraw from the bidding process for ESN so that the government can consider next steps before the award stage.
‘Throughout all of our activity in The Emergency Services Mobile Communications programme (ESMCP) we have been acutely aware of the importance of acting with honesty and transparency and this decision is made with those same values at the heart of what we are doing.’
The Government’s hugely ambitious aim is to move the 250,000 three emergency services end users and some 50,000 other users onto a 4G LTE broadband network provided by a commercial mobile operator – something no other country has done before – and in a savagely tight timescale.
The ‘beefed up’ (i.e. consumer network upgraded to meet the much more stringent standards required for a mission critical network) has to be ready by 2017 when the first Airwave contracts are due to end. The final contracts run out in 2020, when the Government plans to switch off the TETRA Airwave network.
In contrast, other European countries such as Belgium, The Netherlands, Sweden and Finland are upgrading their TETRA networks and looking to some form of MVNO arrangement with commercial network operators to provide ‘best effort’ broadband services. Germany and Norway are in the final stages of rolling out brand new TETRA networks and will be using them until at least 2025.
The difficulty the UK has is that unlike the other countries it does not own the Airwave network – it must therefore go back out to tender when the contracts run out. However, it has left itself little time in which to do so.