The US government awarded AT&T, Qwest Communications International and Verizon the largest telecommunications contract in history, leaving Sprint Nextel out of a deal worth up to $48 billion over the next 10 years. However, the contract, by the General Services Administration, is being valued at about $20 billion over 10 years, but there are chances that it could grow to as much as $48 billion. Therefore, none of the three companies chosen know so far what fraction of the total business they will receive under the contract, formally known as Networx Universal.
Under the contract these companies are under obligation to provide telecommunications services to any of 135 government agencies. On the other hand, the defeat is a crucial setback for Sprint, whose commercial business has been losing ground to its rivals. The lost bid battle would definitely limit the company’s ability to expand at a time when investors are pressurizing it for better results while government use of technology is expanding. Nevertheless, the lost business represents a small fraction of Sprint’s overall revenue.
The announcement of the award was not only a blow to Sprint Nextel it also surprised Qwest, the smallest of the former Bell companies in the competition. Moreover, the contract will facilitate government departments and agencies to select from a range of voice, data, video, IP, and security services offered by the three prime contractors. An another contract, Networx Enterprise, is planned to be awarded later this spring; which would enable subcontractors to participate in the complete renovation and up-gradation of the nation’s governmental telecommunications programs.
The contract will replace an in-place arrangement with Verizon and Sprint. The loss of federal contracts is expected to cost Sprint around $500 million in sales over two to three years. The phone companies have said that they have exhausted millions of dollars preparing for the contract in the past three years, putting many employees to parts of the job.
