pdvWireless Transfers MOTOTRBO Customers, to A-Beep LLC
pdvWireless entered a customer acquisition and resale agreement with A Beep and a customer acquisition, resale and licensing agreement with Goosetown Enterprises, along with a memorandum of understanding with the principals of Goosetown. pdvWireless will continue operating trunked facilities in the markets in which customers are being transferred and in other markets in which it holds FCC licenses.
A Beep operates the Digi-Talk network in the Midwest using NEXEDGE technology, along with a nationwide push-to-talk (PTT) service. Goosetown operates a wide-area MOTOTRBO trunked network called TRBOVoice covering parts of Vermont, New Hampshire, New York, Pennsylvania, Massachusetts, Connecticut and New Jersey.
A Beep acquired pdvWireless’ TeamConnect customers in the Atlanta, Chicago, Dallas, Houston and Phoenix metropolitan markets, the right to access the company’s TeamConnect Metro and Campus systems — the MOTOTRBO systems — and the right to resell access to the pdvWireless’ MOTOTRBO systems pursuant to a mobile virtual network operation (MVNO) arrangement.
A Beep agreed to provide customer care, billing and collection services for all purchased customers. pdvWireless will initially continue to provide these services for a 90-day period to help facilitate transitioning the customers. Additionally, pdvWireless will also pay all site lease, backhaul and utility costs required to operate the MOTOTRBO systems for two years.
A Beep agreed to pay pdvWireless a certain portion of the recurring revenues — ranging from 20 to 100 percent — received from the purchased customers during the agreement term. A Beep will also pay a portion of recurring revenues, from 15 to 35 percent, from pdvWireless’ customers who use A Beep’s push-to-talk (PTT) Diga-Talk Plus application for four years.
The A Beep agreement provides audit rights to pdvWireless, mutual indemnification obligations and certain liability waivers. The agreement has a term of no longer than six years unless terminated earlier by one of the parties as a result of a material breach by the other party.
Goosetown acquired TeamConnect customers in the Baltimore/Washington D.C., Philadelphia and New York metropolitan markets, the right to access the pdvWireless’ MOTOTRBO systems, the right to resell access to the MOTOTRBO systems pursuant to an MVNO arrangement and a license to sell the TeamConnect Mobile, TeamConnect Hub and TeamConnect for Smart Devices applications.
Goosetown agreed to provide customer care, billing and collection services for all Goosetown purchased customers with a 90-day transition period. Additionally, pdvWireless will pay all site lease, backhaul and utility costs required to operate the MOTOTRBO Systems for two years.
Goosetown also agreed to pay pdvWireless a portion of the recurring revenues — ranging from 20 to 100 percent — received from the Goosetown purchased customers during the agreement. Additionally, Goosetown agreed to pay pdvWireless 20 percent of recurring revenues from the licensed applications for four years. The Goosetown agreement provides audit rights to pdvWireless, mutual indemnification obligations and certain liability waivers. The agreement has a term of no longer than six years.
pdvWireless also entered into the memorandum of understanding (MOU) with TeamConnect, a limited liability corporation (LLC) formed by the principals of Goosetown, under which pdvWireless will assign the intellectual property (IP) rights to its TeamConnect- and pdvConnect-related applications and software pursuant to the terms of agreement of the LLC in exchange for a 19.5 percent ownership interest in the LLC. The Goosetown principals agreed to fund the future operations of the LLC, subject to certain limitations.
The LLC will assume the company’s software support and maintenance obligations under the Goosetown and A Beep agreements. The LLC will also assume customer care, billing and collection services related to the pdvConnect applications. pdvWireless will provide 90 days of transition services.
pdvWireless is obligated to pay the LLC a monthly service fee for two years for its support obligations under the Goosetown and A Beep agreements. The LLC is obligated to pay pdvWireless a certain portion of the billed revenue received by the LLC from pdvConnect customers for four years.
In connection with the agreements, the pdvWireless board of directors approved a plan to eliminate 20 positions, or 30 percent of the company’s workforce, and close its San Diego office. The company expects to record a restructuring charge in the fourth quarter of fiscal 2019 of about $900,000, primarily related to employee severance, retention and benefit costs and rent for the San Diego office. An additional $200,000 of restructuring charges will be incurred during fiscal 2020 and 2021 related to employee retention costs.
pdvWireless said the actions will decrease operating costs by about $2.1 million on an annualized basis. The actions associated with the cost reduction and restructuring actions are anticipated to be completed by July 31.