The FCC today voted 5-0 to award Ericsson's (NASDAQ: ERIC) Telcordia unit a five-year contract to manage the U.S. government's local number portability (LNPA) database, replacing Neustar, the previous LNPA administrator. The LNPA database helps phone subscribers keep their phone numbers when switching from one provider to another.
The decision was a big blow to Neustar, which relied upon the LNPA contract for 49 percent of its revenue in 2013, according to a filing at the Securities and Exchange Commission. According to Bloomberg, Neustar has made more than $3 billion as the LNPA administrator since 1997. The current contract expires June 30.
FCC Chairman Tom Wheeler noted that the approval of Telcordia as the new administrator should result in substantial savings for consumers. During the proceedings, the FCC noted that last year the LNPA contract cost the government $260 million and that Telcordia's bid to handle the administration of the LNPA came in at less than $142 million per year.
In response to the decision, Neustar President and CEO Lisa Hook issued this statement: "The LNPA vendor selection process overseen by the FCC has been procedurally defective. Its action presents substantial transition risks and cost to the industry and the consumers it serves. The FCC has now embarked on a transition that is fraught with complexity and difficulty rather than minimizing risks and ensuring that the broadest set of constituencies benefit from the continued flawless operation of a critical element of U.S. telecommunications infrastructure. We are considering all options to address the significant flaws in the selection process."
The company also affirmed its previous guidance for the first six months of the year. Specifically, Neustar said it anticipated its revenue to range from $495 million to $505 million, or growth of 6 percent to 8 percent; adjusted net income to range from $115 million to $120 million, or growth of 4 percent to 9 percent; and adjusted net income per share to range from $2.04 to $2.12, representing growth of 14 percent to 18 percent.
The vote in favor of Telcordia was not a huge surprise. Earlier this month, the FCC's Wireline Competition Bureau recommended that Telcordia replace Neustar. Neustar argued that if it lost the contract the time it will take to transfer numbers will increase from hours to days. Telcordia argued that this will not happen.
Now that the FCC has voted to award the deal to Telcordia, the company will begin negotiating with the North American Portability Management numbers database, which has cable- and telephone-company members.
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