Motorola Solutions announced last night (3 December 2015) that it is to acquire the UK’s emergency services communications network and services provider Airwave for £817.5 million (approximately $1.2 billion).
The deal, the subject of much speculation since the summer, has now been confirmed and is expected to close in the first quarter of 2016. A number of potential buyers looked at buying Airwave earlier in the year, but it is thought most were put of by the size of the company’s debt.
The Airwave network was built under a PFI contract, which meant Airwave had to raise all the money to design and build it. Airwave 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, and is said to be supportive of the deal.
In March 2014, GDCL won the backing of a UK court to extend £1.73 billion of loans and 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. The current debt is thought to be about £1.2 billion with the majority held by HSBC and Lloyds Banking Group.
However, Kelly Mark, Corporate Vice President - Strategy at Motorola, told Wireless in an interview this morning (4 December 2015): ‘We are acquiring the asset debt free; none of the debt transfers over to us.’
Motorola expects its net cash payment to be approximately £700 million (approximately $1 billion) at closing, based on purchase price adjustments and cash in the business. In addition, a deferred cash payment of £64 million will be made in November 2018. The agreement is subject to required approvals and other customary closing conditions.
Motorola said in a statement issued on 3 December that it currently plans to fund the transaction with bank financing and cash on hand, predominantly from international funds. Upon closing, the company expects the transaction to be immediately accretive to non-GAAP earnings and free cash flow.
Airwave has some 600 staff and as regards possible staff redundancies and the fate of the Airwave senior management team, Mark said: ‘Buying Airwave is all about growth for us – there are 300,000 users of the Airwave network to provide services to. We are a large global company and we always look at how we can run things better, but we are only just now starting into this.
‘There are some very experienced senior people in Airwave and we will look to leverage and learn from their expertise. We will dive into all this when we do the integration planning between now and when we hope to close the deal at the end of Q1 2016.’
Motorola is the Home Office’s preferred bidder for Lot 2 of the Emergency Services Network – a 4G broadband network, which is due to run on UK mobile operator EE’s (which is the preferred bidder for the Lot 3 main area network contract) system.
Buying Airwave effectively puts Motorola into a near monopoly position as a single entity dominating services, support and equipment to the emergency services in the UK. Motorola provides the TETRA infrastructure for the Airwave network and is a major supplier of radios to many UK police, fire and ambulance organisations.
As the ESN Lot 2 provider it will be in charge of applications, devices and services running over the EE network. If the Airwave deal is approved and confirmed, it’s dominant position in UK mission critical world will be seen as ironic by some, as the Home Office deliberately broke ESN into several contracts to avoid having single providers like Airwave.
Commenting on that, Mark said: ‘I think our acquisition of Airwave helps the UK government in its plans to evolve mission critical voice and data services. We are the leading provider of mission critical communications and I think it is great to have us support the Home Office’s ambition to take this forward and modernise the country’s emergency services communications. Driving the evolution of mission critical communications is what we do.’
Airwave operates on the older TETRA 1 technology, rather than the newer TETRA 2, which has enhanced data capabilities. Asked whether Motorola might look to upgrade this, Mark said: ‘As regards the TETRA technology on the Airwave network, this is the same TETRA technology we still selling all over the world. The Norwegian’s have just deployed TETRA on their Nødnett emergency services network and the Germans have done the same on their BOS network.’
However, he said Motorola will look to make use of Airwave’s systems. ‘We will look to leverage Airwave’s assets. It has some great applications and services, which they already provide, and we will look to add on more services in the future.’
Not the least of those assets is its masts, which have the best geographic coverage in the UK of any network. Asked whether Motorola might work with EE to enable them to use those masts (EE has to extend its network coverage to meet ESN obligations), Mark said: ‘We have not talked to EE about the possibility of using Airwave masts to extend their coverage for ESN. But we will look to use all those assets and make sure we can deliver the services required.’
The deal is perhaps slightly complicated by the fact that last week Airwave issued a writ in the Technology and Construction Court against the Home Office complaining it had been unfairly treated in the competition for Lot 3, won by EE.
Commenting on this, Mark said: ‘This is a legal proceeding which Airwave chose to embark on independent on us. Until we close the deal we are separate companies and we have no influence on that at the moment. When we close the deal in Q1 2016, we will look at how we proceed on that issue.’
In terms of how the acquisition of Airwave helps Motorola’s ambition to expand its managed support services business, Mark said: ‘We are very excited about what we announced last night. Buying Airwave is a great support of our strategy to grow managed support services and provides a great platform for us to grow further on.
‘Motorola Solutions is the largest manager of networks around the world; we have over 20 networks in places like Austria, Denmark, Australia, Norway and America. Airwave is a great addition to that business. As networks become more complex customers are looking to us to help them manage their networks and growth in that area is a big part of our stated strategy.’
The Airwave network
Airwave is the largest private operator of a public safety network in the world, delivering mission-critical voice and data communications to more than 300 emergency and public service agencies in Great Britain.
Based on Terrestrial Trunked Radio (TETRA) technology provided by Motorola Solutions, its network covers 99% of Great Britain’s landmass, is resilient and enables more than 300,000 police, fire, ambulance and other emergency personnel to easily and securely communicate with each other.
Commenting on the deal, Richard Bobbett, chief executive officer of Airwave, said: ‘Airwave has proven expertise in delivering mission-critical voice and data communications services, and over the past 15 years we’ve invested significantly in the development of a secure, resilient and interoperable network.
‘We are delighted that through this new relationship with global leader Motorola Solutions, we are able to enhance our offering and ensure our customers continue to benefit from the high-quality service they have come to expect.’
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