Sprint Expands Government Business Beyond FTS2001
Sprint Expands Government Business Beyond FTS2001<@VM>WorldCom Eyes E-Gov Market
By Jennifer Freer, Staff Writer
In the aftermath of its failed merger with WorldCom Inc., Sprint Corp. is moving rapidly to expand its federal government business beyond its lucrative FTS2001 contract with the General Services Administration.
The company, based in Westwood, Kan., is creating new partnerships and teaming with top federal systems integrators to compete on future multibillion-dollar projects, including the Federal Aviation Administration's Telecom Infrastructure contract and an information technology services contract for the Department of Health and Human Services.
"Sprint is more than FTS2001," said Mike Ligas, director of business development for Sprint's Government Systems Division, which in 1999 brought in approximately $570 million of the company's $19 billion in revenue.
FTS2001 is the GSA's $5 billion long-distance telecommunications contract to provide government agencies with long-distance voice, data and video services. The contract lasts four years and has four one-year options. Sprint and WorldCom of Clinton, Miss., won the contract, a follow-on to FTS2000, in late 1998.
"We are proud of the FTS2000 and FTS2001 contracts, but we are also aggressively pursuing other business," Ligas said. Overall, the government division staff grew by 40 percent last year to 400 employees.
Among recent initiatives, Sprint's government division this month formed a partnership with Electronic Data Systems Corp. of Plano, Texas, calling for Sprint to work more closely with EDS on its GSA schedules, Ligas said. The partnership enables Sprint to reach agencies it may not reach through FTS2001, and gives EDS access to Sprint's services, he said.
Sprint also has joined industry teams chasing some of the larger federal information technology contracts. The company is:
? Partnering with General Dynamics Corp. on the $10 billion Navy/Marine Corps Intranet contract. The deal seeks to provide secure voice, video and data networking, desktop computers and other services for more than 400,000 computer users at Navy and Marine Corps facilities in the continental United States and Hawaii. It spans five years with three one-year options.
? Partnering with Harris Corp. on the $2 billion FAA Telecom Infrastructure contract to manage the agency's telecommunications networks. That award, for 10 years, is expected by the end of the year.
? Partnering with Science Applications International Corp. on the $15 billion Department of Health and Human Services' National Institutes of Health Chief Information Officer Solutions and Partners II contract. The 10-year deal is for IT integration and outsourcing support services.
? Talking to potential partners to bid on NASA's $1.8 billion Scientific and Engineering Workstation Procurement III contract for hardware, software and support services necessary to supplement the existing SEWP systems.
? Adding new services to its GSA schedule. In August, for example, Sprint added the Fly-Away Satellite Terminal, a mobile satellite unit that can be positioned anywhere in the world for services such as command and control systems, disaster relief and distance learning. The company already has sold three satellite systems to the Army and hopes to sell more in the Army's $600 million distance learning program. Sprint also is waiting for approval to have its wireless network, Personal Communications Service, added to the GSA schedule.
"These other contracts allow us to serve agencies that may not be covered under FTS2001," Ligas said.
Sprint's strategy largely has remained the same since the merger with WorldCom was called off in July, according to Ligas, who added that the company can still play in the major growth markets: security, information assurance and electronic commerce.
Jilani Zeribi, a principal analyst for Current Analysis, a business intelligence and analysis company in Sterling, Va., agreed that Sprint can compete on its own, but said the company needs to play catch up in two areas: the international front and Web hosting.
For starters, Sprint sold its stake in Global One, Brussels, Belgium, a global telecommunications company and subsidiary of Paris-based France Telecom. This leaves Sprint without an international presence, Zeribi said. Plus, in Web hosting, Sprint was relying on WorldCom's abilities, he added.
"Sprint needs to grab a Web-hosting company, and there are a lot of options in that market," Zeribi said. "It's a lot easier for Sprint to get into the hosting space than for WorldCom to get into the wireless space."
Sprint's government group has looked at acquisitions of companies in areas such as security, information assurance and electronic commerce. Ligas would not disclose specific acquisition targets.
Sprint was "rocked by the changes associated with the WorldCom merger," said Warren Suss, a telecommunication consultant and analyst in Jenkintown, Pa. But the company is putting into place a revitalized plan to recover from the failed merger while remaining focused on its FTS2001 contract, he said.
Sprint officials expect to have the FTS2001 transition completed by Dec. 6, the deadline for switching over, with 85 percent of the government sites transitioned now. Not only is Sprint transitioning government agencies to the new contract, but it is gaining ground in competing with WorldCom for AT&T customers.
As one of the two holders of the FTS2000 contract, Sprint had 24 percent of the $2 billion revenue after competing with AT&T Corp. Now, Sprint has 50 percent of the revenue for the FTS2001 contract, Ligas said.
The company held onto most of its former government customers from FTS2000 and gained some of AT&T's old customers, he said.
Sprint's new FTS2001 customers are the departments of Treasury and Veterans Affairs, the Environmental Protection Agency, the Federal Emergency Management Agency and the Securities and Exchange Commission.
Some agencies divide their services and chose Sprint for data service and WorldCom for voice service. The departments of Defense, Education, Energy and State split their services between the two companies.by Jennifer Freer, Staff Writer
Like its counterpart Sprint Corp., WorldCom Inc. is working to build its government business outside of the General Services Administration's FTS2001 contract, especially in the
e-government arena, company officials said.
Most recently, the company made a $6 billion purchase of Intermedia Communications Inc., a Tampa, Fla.-based communications company and owner of Digex of Beltsville, Md.
The Sept. 5 deal provides WorldCom's government division a steppingstone to Web-hosting services by giving the company a 55 percent controlling interest in Digex, a managed Web and application hosting services company. WorldCom also will gain Digex's range of managed, enterprise and portal hosting solutions to integrate with Intermedia's network facilities.
"We want to add secure Web-hosting and e-government solutions as part of our network services," said Jerry Edgerton, senior vice president of government markets for WorldCom. "That's where we believe Intermedia is complementary to WorldCom. Our portfolio will be significantly enhanced with the Intermedia purchase."
Edgerton would not comment on other possible acquisitions WorldCom is exploring, but did say he has a wish list.
WorldCom had revenue in 1999 of $37 billion and net income of $4 billion. The government division does not disclose its revenue.
"Where we've had gaps or voids in our ability to offer services, we have supplemented that with other partners," Edgerton said. For example, the company has partnered with equipment manufacturer Cisco Systems Inc., San Jose, Calif., and systems integrator Electronic Data Systems Corp., Plano, Texas.
While WorldCom has gained ground in Web-hosting and e-government, one industry analyst said the failed merger with Sprint has left WorldCom vulnerable in the wireless world.
"WorldCom needs a wireless network," said Jilani Zeribi, principal analyst for Current Analysis, a business intelligence and analysis company in Sterling, Va. "That's the only thing they needed in my mind from Sprint. They need to make a wireless acquisition, but it's not clear to me that there's a lot out there."
WorldCom has been going after large government contracts, such as the $2 billion Federal Aviation Administration's Telecom Infrastructure contract, the $10 billion Navy/Marine Corps Intranet contract and the $15 billion Health and Human Services Chief Information Officer Solutions and Partners II contract.
The Clinton, Miss., company in May won the five-year, $50 million Commonwealth of Virginia Network contract to build and design an integrated data and voice communications network that will serve as the platform for Virginia's e-government initiatives.
The company also is working hard to sign up agencies to FTS2001, and feels "we've never slowed down," Edgerton said. So far, WorldCom has finished FTS2001 transition for the Social Security Administration and the departments of Defense and Agriculture, which are former customers under AT&T Corp.'s FTS2000 contract, Edgerton said. The company is also working on new data networks for Social Security and the Army Reserve.
WorldCom also has been picking up other AT&T FTS2000 customers, including the departments of Commerce, Health and Human Services, Labor and Transportation, and the GSA, he said.