Motorola Inc. pulled out of equipment negotiations with Sprint Telecommunications Venture last week, saying financial and commercial terms proposed by Sprint were extraordinary.
“We made every effort to reach an agreement, and put our best and final offer on the table,” said Motorola spokesman Scott Wyman. “It was a big opportunity, but you have to balance that against a prudent business decision.”
Meanwhile, Sprint continues to negotiate with other equipment vendors and expects to announce agreements later this month. “We remain confident that our vendors will provide what the venture needs within our delivery time frames,” said Bernie Bianchino, STV chief business development officer.
STV began negotiations with personal communications services equipment vendors late last summer. Analysts have estimated the total contract to be worth almost $3 billion-certainly expected to be one of the largest initial PCS contracts in the nation. The venture plans to offer service in 20 to 25 PCS markets, about 60 percent of its footprint, by the end of this year.
There was speculation last December that discussions between Motorola and Sprint were becoming estranged because Motorola refused to meet Sprint’s financing desires. Motorola insisted it remained in the running and recently made a final offer. Sprint said it continues to view Motorola as a candidate for future contracts.
Motorola said it agreed not to give details about Sprint’s expectations, but the manufacturer did note that Sprint’s commercial terms, particularly regarding penalties, were unacceptable. Sprint elaborated on the negotiations process only to say, “Arrangements are in place with vendors for initial work.”
Industry sources say Sprint may be asking for as much as 100 percent financing, with no money down and no interest, and perhaps no payments until revenue is secured.
Motorola was one of three vendors vying for a piece of the STV contract; AT&T Network Systems and Northern Telecom Ltd. are expected to continue in negotiations.
The venture intends to use Code Division Multiple Access technology. Handset manufacturers believed to be in negotiations with STV include Nokia Mobile Phones, Qualcomm/Sony and Ericsson Inc.
While the STV contract was significant for any vendor, Motorola has a balanced approach to the industry, said telecom analyst Richard Siber of Andersen Consulting.
“They are not reliant on any one client. This doesn’t mean all or nothing for them. Motorola has plenty of other things to pursue, such as handsets or the cable market,” Siber said.
Other PCS eggs in Motorola’s basket include the buildout of GTE Mobilnet’s PCS network, and Motorola has split the PCS PrimeCo L.P. contract with AT&T Network Systems. Motorola also has an arrangement with C-block auction bidder U.S. AirWaves Inc. to provide CDMA equipment. Motorola built the CDMA system in Hong Kong for Hutchison Telephone Co.
Nortel also has several strong PCS contracts in the United States-a $250 million contract with Omnipoint Corp., a $200 million infrastructure contract with BellSouth Personal Communications Inc., a $200 million agreement with Western Wireless Corp., a role in the construction of the American Personal Communications network in Washington, D.C. and an agreement with C-block bidder GO Communications Corp.
In addition to half of the PrimeCo CDMA contract, AT&T Network Systems will build a portion of the Time Division Multiple Access network for AT&T Wireless Services, which is licensed for PCS covering about 107 million pops.
STV is owned 40 percent by Sprint Corp., 30 percent by cable-TV operator Tele-Communications Inc. and 15 percent each by Comcast Corp. and Cox Cable Communications Inc.
