999 Comms Firm Airwave In Secret Sale Talks

The company which provides critical communications infrastructure to Britain's emergency services is holding secret talks about a sale amid uncertainty over the destination of a new £1bn Government contract.

Sky News has learnt that Airwave, which was bought in 2007 for £1.9bn by two infrastructure funds managed by Macquarie, the Australian bank, has been engaged in discussions with a range of potential buyers including Motorola Solutions (NYSE: MSI - news) and Hong Kong Telecom.

Vodafone is also said to have been examining a possible bid.

Airwave provides communications services to the police, ambulance and fire services using conventional radio spectrum, having been established in 2000 under the ownership of what was then BT Group (LSE: BT-A.L - news) 's mobile phone division, BT Cellnet.

The company is now valued at roughly £1bn including its debt pile, sources said.

News (Other OTC: NWSAL - news) of the auction comes just days after O2 pulled out of a procurement process being run by the Home Office to appoint a provider of a dedicated 4G network due to be introduced during the next few years.

Some experts have raised concerns about the intended switch because of doubts that the technology is ready and reliable.

O2's withdrawal leaves EE, which is in the process of being acquired by BT, as the sole remaining bidder for the contract.

The Airwave sale process is being run by Lazard, the investment bank.

It also comes as a review by David Anderson QC said that laws enabling the police and security services to monitor the public's phone and internet activity were "undemocratic and unnecessary", and required a complete overhaul.

The ability to persuade a bidder to pay a substantial price for Airwave could hinge on whether the company can position itself as an attractive alternative to the current procurement process with only one remaining contender for the contract.

Deloitte, EY and Rothschild are all understood to have roles in the process advising either the Airwave board or the company's lenders.

Other prospective bidders, such as BT, are said to be monitoring the process, but it is not thought to have tabled a formal bid.

The contest to build and run a new Emergency Services Network (ESN) was launched by the Home Office in 2013, with the intention of awarding the contract in the late summer of this year and services beginning in 2017.

In March, the Home Office said that Airwave Solutions, UK Broadband Networks (a subsidiary of Hong Kong Telecom) and Vodafone were no longer in the running for the main emergency services network contract.

In a statement given to the Financial Times earlier this week, the Home Office said that O2's decision to withdraw had been disappointing, but added:

"However, the process to establish a more effective, flexible, and affordable network for the UK's police, fire and ambulance services will continue.

"Procurement remains extremely competitive and will deliver value for money."

The parties involved in the sale process either refused to comment or could not be reached.