VeriSign strategy working as advertised

When VeriSign made its move into telecom with the acquisitions of billing provider H.O. Systems and Illuminet, a service bureau provider of signaling and other network-based services, the company figured it could win in the service bundling game. It figured right.

This week, VeriSign wrested MetroPCS and Douglas Communications from their respective signaling providers by leveraging its position as the two wireless companies’ billing vendor. Both Dallas-based MetroPCS and San Rafael, Calif.-based Douglas were customers of H.O. Systems.

VeriSign will now provide the operators with SS7 and ISUP (ISDN User Part) trunk signaling, billing and customer care on a service bureau basis.

“This gives further credibility to the bundled offerings VeriSign is out there promoting day after day to the wireless carrier community,” said Barry Mathis, director of sales for the U.S. wireless division of VeriSign Telecommunications Services.

Both wireless operators expressed through statements a desire to cut capital expenses by outsourcing and cut operational expenses by limiting the number of vendor contracts they had to manage.

“We’re not finding too many operators looking to spend their own capital to build out their SS7 networks,” Mathis said. “And very seldom do we see them wanting to buy their own hardware and software code and maintain it in house.”

Dealing with a small number of vendors can have its downside for service providers as well, especially in a market where business viability and continuity remain questions for even the most trusted vendor. VeriSign says it has this covered by maintaining the ability under the VeriSign corporate structure to offer separate contracts for customers with multiple services.

“This way if their clearinghouse or settlement needs change, for example, or they decide to go in a different direction, they wouldn’t have to worry about going through a billing conversion just because they were swapping out other services,” Mathis said.

VeriSign, a leader in providing digital trust services, launched VeriSign Telecommunications Services in March of this year to extend its business into the service provider market and leverage the acquisitions of Illuminet and H.O. Systems. Rivaling Cisco Systems’ acquisition binge two to three years ago, VeriSign has been building its business on both the telecom and Internet sides of the industry over the last year. The company bought H.O. in February for $350 million in cash and Illuminet in December 2001 in a stock deal worth approximately $1.2 billion.

VeriSign’s Enterprise and Service Provider Division, of which its telecommunications services is a part, accounted for $207 million (67%) of VeriSign’s total revenue in the quarter ending Sept. 30.