Five Telecoms Chosen for Government Contract; Sprint Makes Cut

AT&T, Level 3, Sprint Nextel, Qwest and Verizon have been awarded a telecommunications contract from the federal government worth up to $20 billion over 10 years. The contract is the second part of the General Services Administration's comprehensive overhaul of voice, data, telecom and Internet services for over 135 federal agencies and offices. The first contract, dubbed Networx Universal, required bidders to demonstrate they could provide 36 mandatory services. The second contract, Networx Enterprise, required proof of nine such services. Networx Universal, worth up to $48 billion, was awarded in March to AT&T, Verizon and Qwest, but snubbed Sprint -- a surprise to analysts, since Sprint has provided telecom services to the government for almost 20 years. "[The second contract award] is clearly welcome news for the five companies, particularly Sprint," said Stifel Nicolaus & Co. analyst Blair Levin. Enterprise will offer fewer services than Universal, but will be less expensive. Agencies will be obliged to choose one or the other, and technology consultant Warren Suss has speculated that Sprint could face "an uphill battle" if most agencies opt for Universal.

Sources: Reuters, Chron.com, Bloomberg, TheStreet.com
Commentary: Is Sprint Next In Line For A Buyout After Alltel? • Sprint/Nextel: The Next Data Wireless Kings? • Bill Nygren on the Long Case for Sprint-Nextel
Stocks/ETFs to watch: Sprint Nextel Corp. (S), Level 3 Communications (LVLT), AT&T Inc. (T), Verizon (VZ), Qwest Communications International Inc. (Q). ETFs: Wireless HOLDRs (WMH), Telecom HOLDRs (TTH), iShares Dow Jones US Telecom (IYZ)
Conference call transcripts: Q1 2007

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