Telecom giants win huge government deal

/ Source: The Associated Press

AT&T, Qwest Communications and Verizon on Thursday were awarded the government’s largest telecommunications contract ever, a 10-year deal worth up to $48 billion.

The contract winners, who beat out Sprint Nextel Corp., don’t simply split a pool of money. They now have to compete with each other for the various telecom needs of dozens of federal agencies, the General Services Administration announced.

The contract covers voice, video and data services and technologies for as many as 135 agencies operating in 190 countries. Several major departments, including Homeland Security and Treasury, have already signed up.

While AT&T Inc., Qwest Communications International Inc. and Verizon Inc. gained an important and deep-pocketed client, the announcement was a huge blow to Sprint, analysts said, because it has been providing telecom services to the federal government for nearly 20 years.

“The federal government was Sprint’s first major customer since the company started,” said technology consultant Warren Suss of Jenkintown, Pa.

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 roughly $200 million to $250 million annually in existing government business.

Executives from Sprint plan to meet with GSA officials next week to discuss why their contract proposal fell short, and the company will decide afterwards whether to file a protest, spokeswoman Sukhi Sahni said in an e-mail.

For the winners, Thursday’s announcement was perhaps most significant for Qwest, the smallest among them. Suss said Qwest can now leverage its government business to gain more corporate clients.

Qwest senior vice president Diana Gowen conceded that the Denver-based company has its work cut out for it going up against AT&T and Verizon, but said Qwest’s smaller size would make it more agile. “If you want to make it the David and Goliath story, we’ll be the David and slay the dragon,” she said.

Don Herring, president of AT&T’s government business, said getting on the contract is “a really important first step,” adding that it will be several months before the companies start bidding on specific agency projects. AT&T is based in San Antonio.

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 advanced technologies and services defined in the Networx program will serve as a platform to transform the government’s telecommunications infrastructure to a more seamless and secure environment,” GSA’s acquisitions commissioner Jim Williams said in a prepared statement. GSA procures and manages federal assets.

The two previous 10-year government-wide telecom contracts had two main providers. The first went to Sprint and AT&T. The second to Sprint and MCI Worldcom, since acquired by Verizon.

For the losers of the Networx Universal contract, there is a consolation prize on the table. 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.