Convergence sparks convergence in billing space

Comverse Technology signed a definitive agreement today to acquire the Global Software and Services division, and certain related assets, of CSG Systems International for approximately $251 million in cash.

With this acquisition, Comverse will expand its addressable market for emerging converged billing and expand the capabilities of its Real-Time Billing group. It will serve the wireless, wireline, cable, satellite and Internet service providers markets.

The acquisition is expected to close by the end of Comverse Technology’s fiscal year (ending Jan. 31, 2006). It is projected to be slightly accretive to the company’s fiscal 2006 pro forma net income.

“We believe the emerging converged billing market is approaching an inflection point and that a significant growth opportunity is at hand,” said Kobi Alexander, chairman and CEO of Comverse Technology.

CSG’s GSS group and its approximately 900 employees will become part of Comverse’s network systems unit, led by Zeev Bregman, CEO of Comverse. Bregman said that GSS complements its product portfolio, technology, customer footprint and strategic direction.

The GSS division includes CSG’s Kenan/BP billing system, which has a nomadic history over the last several years. Kenan Sahin founded Kenan Systems in 1982 and sold the company to Lucent Technologies in early 1999 for $1.48 billion. Lucent sold the billing solution to CSG three years later for $300 million.

It also includes the ICMS customer care and billing assets acquired from IBM in 2002.

The companies are counting on their software-centric product modules to carry them through as carriers converge their networks and services. CSG’s GSS division has approximately 150 service provider customers, including Bharti, British Sky Broadcasting, BSNL, BT, China Telecom, eBay, France Telecom, O2, Telecom Italia and certain Vodafone entities.

Alexander said there is very little overlap in the two companies’ customer bases. Comverse will operate the business unit separately in the short term and in the long term will merge the product lines.

For the six months that ended June 30, 2005, GSS and the related assets to be acquired generated revenues of approximately $83.6 million.

A Comverse spokesman said that while the company is focusing on the converged billing market, which is small at this time, it is the fastest growing segment in billing. “And ultimately it may become the largest segment in billing. We are expanding our addressable market by a significant amount, and we feel our growth rate will be able to far exceed whatever the overall billing market shows,” Baker said.

Ed Nafus, chief executive officer and president of CSG Systems International said in a statement that the divestiture of the GSS Division will allow CSG to intensify its focus on our core competencies in the cable and Direct Broadcast Satellite markets.