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Neustar set to lose contract that provides HALF its revenue

Kevin Murphy, March 5, 2015, 09:31:13 (UTC), Domain Registries

Neustar has been devastated by the news that it is likely to lose a US government contract that provides almost half of its annual revenue.

The US Federal Communications Commission yesterday recommended that Telcordia Technologies take over the Local Number Portability Administrator contract, which Neustar has held since 1997.

The service is basically North America’s centralized phone number registry. It’s not directly related to its domain name businesses.

In 2014, the deal was worth $474.8 million to Neustar, or 49% of its annual revenue.

On the news, the company’s share price fell off a cliff, losing almost 20% of its value before recovering slightly to end the day almost 12% down.

Neustar expressed dismay and anger in a press release, saying the FCC was putting the security of the US phone system at risk:

Although apparently the LNPA is used to port numbers, it is also critical for technology migrations, mergers and acquisitions, disaster recovery, accurate 911 location, and is the only authoritative database for the proper call completion of 11 billion voice calls and text messages each day. The recommendation misunderstands the operating system and would harm public safety, law enforcement, fundamentally burden small carriers, and disrupt service for 12 million consumers — all in pursuit of theoretical savings for a few carriers, which Neustar believes will be dwarfed by the costs and risks of transition.

Switching to Telcordia is currently only a recommendation that FCC commissioners must approve, and Neustar said it will “review all of its options”.

The LNPA deal is due to expire June 30 this year.

Neustar’s domain business — or “security services” as the company calls it — comprises DNS resolution, the registries for .us, .biz and .co, and the back-end registry for many new gTLDs. It brought in revenue of $140.3 million in 2014.

According to Reuters, Neustar is currently talking to advisers about the potential sale of the company, which is currently listed on the New York Stock Exchange, to private equity.

The potential buyers are reportedly waiting for the award of the number portability contract before sealing the deal.

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