WASHINGTON – Dealing a significant blow to Sprint Nextel, the government yesterday awarded the largest-ever federal telecommunications contract – a 10-year deal worth up to $48 billion – to its rivals AT&T, Qwest Communications and Verizon.
The three contract winners will split $525 million, but beyond that they will have to compete with one another for the business of dozens of federal agencies needing to enhance the quality and security of voice, video and data technologies, the General Services Administration said.
Among the products federal agencies will choose from are Internet-based voice and video systems, wireless and satellite communications services and updated network infrastructure.
While AT&T, Qwest Communications and Verizon Communications gained an important and deep-pocketed client, the announcement was a serious loss to Sprint Nextel, analysts said, not least because the Reston, Va.-based company has been providing telecom services to the federal government for nearly 20 years.
Earlier this year, Sprint announced thousands of job cuts amid service troubles, a dwindling customer base and difficulty assimilating Nextel Communications, which it acquired in December 2004. Sprint shares are down about 20 percent from a year ago, and the company is forecasting near-flat operating revenue and earnings this year.
“It's terrible for Sprint,” said technology consultant Warren Suss of Jenkintown, Pa. “The federal government was Sprint's first major customer since the company started.”
While current GSA officials would not say why Sprint lost out, Bob Woods, a former official at the agency who now works as a consultant, surmised that Sprint could not meet the low prices of its competitors. Woods estimated that Sprint could lose about $200 million to $250 million annually in existing government business.
Sprint executives plan to meet with GSA officials next week to discuss why their contract proposal fell short, and the company will decide afterward whether to file a protest, spokeswoman Sukhi Sahni said in an e-mail.
Industry analysts said they expect the federal government to spend at least $20 billion over the life of the so-called Networx Universal contract, which is capped at $48 billion.
The two previous 10-year governmentwide telecom contracts had two main providers. The first went to Sprint and AT&T. The second went to Sprint and MCI Worldcom, since acquired by Verizon.
There is a consolation prize on the table for Sprint and other telecom providers. GSA is planning in May to award a second telecommunications contract called Networx Enterprise – worth up to $20 billion – that contains fewer mandatory requirements and services in select areas across the nation.
In a statement, Sprint said it expected to win the second contract.
Shares of Qwest rose 10 cents to close at $8.95, near the top of its 52-week trading range of $6.12-$9.22.
Shares of AT&T advanced 22 cents to end at $39.17, also close to the top of its 52-week trading range of $24.72-$39.86.
Verizon's stock price added 34 cents to finish at $37.57, just off the peak of its 52-week trading range of $30.10-$38.95.
Sprint climbed 49 cents to close at $19, settling in the lower half of its 52-week trading range of $15.92-$26.89.
All stocks trade on the New York Stock Exchange.
