Motorola was preferred because of the agreement, worth $55 million to Pele-phone, to cancel the buy-back arrangement.
The price of digital equipment supplied to Pele-phone will be up for negotiation again, when the third cellular operator reaches a capacity of 18% of the total market, the equipment procurement agreement approved by Pele-phone’s board last week provides.
Under the agreement, Pele-phone will pay parent company Motorola, which has a 50% holding, $263 million for CDMA technology digital equipment to carry a 1 million subscriber capacity.
Even after Motorola granted an 11%, $30 million discount, the price offered by Korean competitors was still $26 million cheaper. Despite this, Pele-phone decided to buy the equipment from Motorola, among other things because of the collateral agreement to cancel the buy-back arrangement, which give Pele-phone $55 million credit. This sum would not be paid were Pele-phone to buy the equipment from another supplier.