According to the CMA, Motorola acted as a monopoly on emergency service contracts
The UK competition watchdog has found that Motorola Solutions acted as a monopoly to squeeze around £160m a year in excess profits from a lucrative contract to provide communications services to ambulance workers.
A year ago, the Competition and Markets Authority launched an in-depth investigation into the US company’s dual role as a key supplier of the new Emergency Services Network, which will support the country’s police, ambulance and fire services, as well as Airwave’s owner. the older system used by emergency services.
Delays in launching the ESN meant that the Airwave network became extremely lucrative for Motorola, accounting for about 7 percent of global revenue and 21 percent of pre-tax profit.
As part of its decision on Friday, the CMA proposed capping the amount Motorola is allowed to charge for the wireless network and predicted they will inflate £1.1bn in revenue from the network between 2020 and 2026, and earn £1 more could be 160 million additional profit for every year thereafter.
“Our current view is that the Home Department and our emergency services are locked into a monopoly provider who can charge much more than they could in a properly functioning market, while taxpayers foot the bill,” said Martin Coleman, chair of the independent CMA Inquiry Group.
The CMA found that while the initial price for the services, set in 2000, included the capital cost of building the network, these prices should have decreased after the initial spending ended, much like the price of cell phone subscriptions decreases after the consumer paid off the acquisition costs for the handset.
Motorola contested the CMA’s conclusions, saying it rejects the “unfounded and incorrect calculation of ‘excess’ profits based on an arbitrary time period of the Airwave project” and has historically offered rebates to the Home Office.
“The fact is Airwave represents a much better deal for the UK taxpayer over its lifetime than the Home Office originally agreed,” it said, adding that the Home Office and the CMA have agreed to the agreements, which are still in force today. would have approved again in 2016.
The CMA denies this, saying it only approved Motorola’s acquisition of Airwave and “not the terms of the agreement in effect today.”
Commenting on the CMA’s proposal to reduce the price for the remaining years of the contract, Motorola said: “Such unprecedented intervention would seriously undermine confidence in long-term infrastructure investments and contracts with the UK government”.
The investigation was sparked by the Home Office, which wrote to the CMA in April last year to express concern over whether profits Motorola was making from its Airwave contract could hurt incentives to roll out the new ESN.
Motorola agreed to buy Airwave – originally set to close in 2019 – for £817m in 2015 after it was named one of the ESN’s main suppliers.
https://www.ft.com/content/e0ce508f-8e7a-48da-adda-ee0c79c3988a According to the CMA, Motorola acted as a monopoly on emergency service contracts