Motorola Solutions Inc. could make “excess profit” of £1.1 billion ($1.2 billion) from its UK emergency services contract, the country’s competition watchdog said. The watchdog warned that the government had locked into a monopoly provider, which could lead to higher prices and less innovation.
Motorola Solutions was overcharging the UK’s Home Office for its emergency service radio network, which was ultimately being paid for by taxpayers, the Competition and Markets Authority said Friday. The authority recommended that price controls be imposed on the telecom network to restrict how much it can charge.
Motorola’s Airwave Network has been providing the secure mobile system for the UK’s police and ambulance services since 2000. The contract was originally due to end two years ago, but has been delayed until 2026 or later. The CMA said it was concerned about Motorola’s double role in providing the current network and in helping to deliver the replacement network, which is partly behind the large profits. Motorola acquired Airwave in 2016, hence the dual role, the CMA added.
Martin Coleman, chair of the CMA’s independent inquiry group, has criticized the Home Office and emergency services for being locked into a monopoly provider which can charge much more than it could in a properly functioning market.
The CMA has estimated that the company could make around £1.1 billion in excess profit from operating the network between January 2020 and December 2026. If the delay in rolling out a new network continues, the company could make an additional £160 million in excess profit each year after 2026.
A spokesperson from Motorola Solutions said that the company “entirely rejects the CMA’s unfounded and incorrect calculation of ‘excess’ profits.” The spokesperson went on to say that the calculation is “based on an arbitrary time period of the Airwave project.”
According to a watchdog group, the Airwave Network accounts for around 7% of Motorola’s global revenues and about 21% of its pretax profits. This network is a key part of Motorola’s business, and it is clear that it is a very profitable venture for the company.
The Home Office did not respond immediately to a request for comment. The CMA will make a final decision on the matter later in the year. TradeAlgo