March 4, 2015 / 8:40 PM / in 3 years

Neustar faces loss of contract after FCC staff recommendation

WASHINGTON (Reuters) - U.S. Federal Communications Commission staff on Wednesday recommended that the agency drop Neustar Inc in favor of Ericsson AB subsidiary Telcordia Technologies as a contractor that helps telephone carriers route calls and text messages.

Neustar’s shares slid as much as 17 percent on the news. The exclusive government contract, which expires on June 30, accounts for about half of the company’s revenues.

The FCC’s Wireline Competition Bureau on Wednesday circulated a draft order to the agency commissioners that, if adopted, would begin contract negotiations with Telcordia.

Since 1997, Neustar has managed the world’s largest local number portability registry that allows consumers and businesses to keep their telephone numbers when switching among providers, serving more than 2,000 telecom carriers in the U.S. and Canada.

The FCC staff, in announcing the draft order, said they arrived at the recommendation in favor of Telcordia after weighing bids for technical and managerial competence, security considerations and cost-effectiveness. They said the Ericsson subsidiary had “extensive experience” in numbering administration.

Neustar decried the recommendation, arguing the agency staff “profoundly underestimated” the demands put on the contract holder and did not properly evaluate the implications of building a new system.

“The (Local Number Portability Administrator) vendor selection process has been botched procedurally,” the company said in a statement.

“Neustar will continue to raise important questions about this process, and will review all of its options.”

Sources told Reuters last year that Neustar was considering a potential sale amid interest from private equity firms.

The company was working with investment bank JPMorgan Chase & Co to review possible options, sources said, though a sale process may not start until the fate of the contract was finalized.

Reporting by Alina Selyukh; Editing by Alan Crosby and Diane Craft

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