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Ericsson accelerates move to software & systems integration with Telcordia

Ericsson is paying $1.15 billion to acquire Telcordia Technologies Inc in a debt free, cash-only deal. Formerly known as BellCore or Bell Communications Research, Telcordia has been up for sale for some time by it’s financial industry owners- Providence Equity Partners LLC and Warburg Pincus LLC. Please refer to this article for background information: Telcordia Is Up for Sale- who will bid for the company?

Telcordia Technologies offers support systems, network software and consulting services. The private company had sales of $739 million in the 12 months ended Jan. 31, according to a statement. They have over 800 customers in 55 countries, and hold around 1,800 issued patents. Telcordia is particularly well known for its expertise in mobile, broadband and enterprise software and the OSS/BSS side of the business. For years, they’ve talked up netx generation OSS for cellular and other carriers.

“Operators don’t want to change their networks but they want to have them evolve, and software and services are key for that,” said Jean-Michel Salvador, an analyst at Alphavalue in Paris. “This is a way to buy people who know a lot about network evolution,” he said, adding that the price “wasn’t very expensive.”

“Telcordia has a good position with fixed operators and Ericsson is strong in mobile and other domains of the network so together we can create a strong position,” Jan Frykhammar, Ericsson’s chief financial officer, said in a telephone interview today.

Ericsson said the two companies products are complementary and they have different strengths in OSS/BSS. Telcordia can claim top spot in service fulfillment, charging and billing, while Ericsson leads in revenue management and network optimization.

With the Telcordia acquisition, Ericsson will compete with major software and integration companies like Amdocs and Oracle. Yet Ericsson will have a huge advantage- they are the leading vendor of wireless/ cellular infrastructure gear for many global mobile operators. With Telcordia, they will now be in a position to supply hardware, OSS/BSS software, systems integration and operations management services. In an environment where carriers are merging (e.g. ATT and T-Mobile) or setting up joint purchasing ventures (e.g. FT and DT) to cut costs, the economies of scale may give the combined company a competitive edge. In fact, the Ericsson-Telcordia combo will likely produce more revenue and income than if they were separate entitities.

Author’s Note: with fierce competition from Huawei/ZTE, traditional network equipment vendors can’t make money selling ONLY hardware. Network infrastructure gear makers must move into software, systems integration, network management/operations support systems, consulting or even running carriers’ networks to make a decent profit. Ericsson is already managing all aspects of Sprint’s network. We think the Telcordia acquisition will give them additional leverage in the telco market.

Author Alan Weissberger

View all posts by Alan Weissberger | Website

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6 responses to “Ericsson accelerates move to software & systems integration with Telcordia”

  1. Alan Weissberger Avatar
    Alan Weissberger

    Ericsson’s acquisition of Telcordia would make it the dominant player in the rapidly growing global convergent charging market, according to Infonetics Research (www.infonetics.com).

    On June 14th, Infonetics released its latest report on the global convergent charging market. Infonetics quantifies the market segment in 2010 as having been $862.3 million worldwide, representing 37% growth over 2009. The firm projects the market to swell to $3.3 billion in 2015. The top four suppliers by market share, according to Infonetics, are in order Telcordia, Comverse, Ericsson, and Huawei, with Telcordia and Comverse in a dead heat for the top spot.

    “Operators are constrained by their existing billing systems, both IN-based prepaid systems and batch billing systems for the postpaid market. Convergent charging represents a way for operators to deliver new services and offer new pricing models without embarking on full-scale billing transformation projects, and can actually be the first step in a gradual migration project. While initial growth in convergent charging has been in emerging markets such as Southeast Asia, India and eastern Europe, we’re seeing early investment in more mature markets, including western Europe,” notes Shira Levine, directing analyst for next gen OSS and policy at Infonetics Research.

    CONVERGENT CHARGING MARKET HIGHLIGHTS

    •The global convergent charging market, including software and services, grew 37% in 2010 over 2009 to $862.3 million, and is forecast by Infonetics to grow to $3.3 billion in 2015
    •Telcordia and Comverse are now neck and neck in the overall convergent charging market, with Telcordia slightly edging past Comverse in 2010; Ericsson and Huawei are 3rd and 4th
    •Machine-to-machine (M2M) transactions, such as between smart meters and utilities, and between telematics devices and fleet management systems, will far exceed human transactions on the mobile network, driving the need for charging solutions that can account for and reconcile that level of transaction volume
    •There is interest in convergent charging solutions that support enterprise services, such as hybrid accounts for employees, revenue settlement for cloud services, and real-time management of M2M transactions
    •Mobile money is a growing phenomenon, with some operators enabling subscribers to use their cell phones to make payments, such as Oi Brazil, which allows users to pay for small purchases from their prepaid balance, and NTT DoCoMo in Japan, which offers a “mobile wallet” service in conjunction with banks, where the mobile phone replaces a subscriber’s existing credit card
    •There will be increasing demand for integrated policy/charging solutions that enable operators to offer more flexible pricing models, such as variable pricing based on time of day or the subscriber’s location; this trend will drive continued M&A activity between vendors
    •Though the convergent charging opportunity is primarily a wireless one, some wireline operators are experimenting with multi-service convergence, including cable operators delivering quad-play with added mobile capabilities, wireline broadband operators offering their IPTV subscribers access to prepaid video-on-demand content, and fixed line operators supporting their cloud strategies with convergent charging capabilities

    http://www.infonetics.com/pr/2011/2H10-Convergent-Charging-Market-Highlights.asp

    Reply
  2. Ken Pyle, Managing Editor Avatar
    Ken Pyle, Managing Editor

    Alan, thanks for posting your take on this important shift in the telecom landscape. Bellcore (Telcordia’s former name) was such a central part of the “Bell” system back in the day. It is interesting to see how it truly has split from the operator side and is now with the vendors. But the vendors, who are providing the hardware, are more like operators in the sense that they are running the networks.

    It will be interesting to see if the vendor-operator outsourcing relationship is the most effective way in the long-term for carriers to run their business or if this is a core strength that shouldn’t be outsourced.

    Reply
    1. anonymous Avatar
      anonymous

      To Ken’s point on the vendor-operator outsourcing relationship:

      With the Telcordia acquisition, Ericcson can now offer a quadruple play to telcos/ network operators: network equipment, management of network operations, OSS/BSS software and systems integration.

      What then is left for the telco/network operator to do? Will they lay-off/ fire their network operations staff? Where are the checks and balances to keep a one stop shopping vendor (like Ericsson) from fudging or covering up problems of its own making?

      Reply
  3. Frank Tuhy Avatar
    Frank Tuhy

    I agree with Alan’s comments (other than one typo – its “Bellcore”, not “BellCore” J ) and add the following from the perspective of a retired Bellcore manager as well as a user of Bellcore services as the former Sr VP of Technology at Next Level Communications.

    GR-303 is often used as the interface between mobile systems and switching systems in the fixed (landline) network. Not only did Telcordia write GR-303, they developed a custom test set for analyzing hardware systems supporting GR-303 as well as analyzing GR303 itself. That analysis also included interoperability with the OSSs that support GR-303 interfaces. That expertise combined with Ericsson’s expertise is another element that makes the combined companies a formidable strength in the integration of fixed and mobile networks from a hardware, OSS software, and systems integration and operations management services perspective.

    Reply
    1. Alan Weissberger Avatar
      Alan Weissberger

      Thanks Frank. Are you as amazed as I am that it took so long to sell Telcordia and for only a little over $1B? I would have thought their patent portfolio and IP in OSS’s would be worth more than that!

      Compare Telcordia’s valuation with that of Internet Radio leader Pandora, which has never made money in its 12 years of existence! Why stop there? All the social media private companies have multi-billion dollar valuations. How could telecom be out of favor with investors for so long?

      Reply
  4. convergent charging Avatar
    convergent charging

    Customers also need services at their own budget. It is the primary concern for the CSPs to provide the telecom software billing systems and convergent billing at affordable budgets.

    Reply

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