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Ericsson deepens back-office focus with Telcordia acquisition

$1.15 billion deal gives Ericsson, already ramping up its BSS/OSS focus as part of its mobile and network outsourcing work, new customers and capabilities in service fulfilment, assurance and real-time charging

The line between network and back-office operations has been blurring for some time, with Ericsson today making a major investment in support of that trend by acquiring BSS/OSS vendor Telcordia for $1.15 billion. Ericsson said it acquired Telcordia for capabilities to chase three major trends: mobile broadband service delivery, managed services/network outsourcing and global OSS/BSS transformation projects.

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Telcordia had been rumoured to be on the block. The vendor has faced a challenge familiar to many long-standing industry vendors: growing into new IP and mobile markets while maintaining significant legacy network business, in Telcordia’s case voice network operations platforms dating back to its Bell Labs roots.

To that end, Ericsson buys a company that has seen relatively flat revenues and margins in recent years, but that has a strong U.S. customer base (complementing Ericsson’s global focus) and back-office product strength in key new areas like IP service assurance and real-time charging, the latter a key enabler of new mobile business models, said Hans Vestberg, president and CEO of Ericsson, in a press and analyst call announcing the acquisition this morning.

Telcordia delivers some of its BSS/OSS software “as a service” via several network operations centers, an approach that Ericsson is pursuing on a much larger, global scale. Ericsson’s Vestberg says his company will take a multi-pronged approach, delivering Telcordia products as a standalone software product; as a managed service solution; and as consulting services delivered as a part of large telco integration/transformation projects. “We will talk to our customers to see what sort of solution they want,” he said, noting that the fact that Telcordia solutions run well in multi-vendor networks is part of the appeal, as Ericsson’s managed services business will never simply be about Ericsson products alone.

Though it has BSS/OSS products today, Ericsson’s main focus is on the network side of the business, especially wireless. But company executives said they need back-office operations and billing solutions to help operators manage those increasingly complex networks, which are growing to not only serve millions of customers but billions of connected devices. Mobile operators also need to think about service assurance and delivery right from the outset, including creating innovative pricing and billing models to separate themselves from competitors.

“Very early on in this process it was clear we see the world very similarly,” said Telcordia CEO Mark Greenquist, echoing the need to help operators manage billions of devices while focusing on service innovation.

Telcordia last year had revenues of $739 million, serving 200 customers in 55 countries (though 70% of its revenues are U.S.-based). Ericsson will absorb its 2600 employees, initially running the business out of its multimedia group by in the long-term moving platforms and solutions into other areas of the business as well, said CEO Vestberg. The acquisition is subject to regulatory approvals.

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© 2014 Penton Media Inc.

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