Swedish vendor Ericsson has agreed to acquire US-based telecoms software company Telcordia for US$1.15bn in an all cash deal.
In a statement yesterday, Ericsson said it had agreed to acquire 100% of the company from private equity firms Providence…
Swedish vendor Ericsson has agreed to acquire US-based telecoms software company Telcordia for US$1.15bn in an all cash deal.
In a statement yesterday, Ericsson said it had agreed to acquire 100% of the company from private equity firms Providence Equity Partners and Warburg Pincus.
Pending regulatory approval, the deal is expected to close in Q4 2011 and come into full effect in Q1 next year.
Ericsson emphasised Telcordia’s expertise in OSS/BSS (operations support system/business support system), which it described as crucial for handling the growth in mobile broadband traffic. It said they served “as the engine to monetising traffic, offerings and products that operators sell”.
It added that the market for software and systems integration was valued at approximately US$35bn in 2010, and expected to grow between 6% and 8% a year from 2010 to 2013.
Media reports suggested that the acquisition would help Ericsson produce billing systems able to charge smartphone users for downloads.
The Financial Times said that Ericsson had been looking to end its dependence on the sales of network equipment by moving into the area of managing the infrastructure of operators.
Ericsson said the acquisition would bring “global presence, service capabilities and leadership in OSS, charging and billing solutions”.
The company’s president and CEO, Hans Vestberg, said that the importance of OSS and BSS will continue to grow as more devices become connected, services become more mobile and new business models for mobile broadband are introduced.
Vestberg said: “In this context, Telcordia brings very skilled people and knowledge, a large business in North America and other markets, as well as a good multi vendor product portfolio.”
Telcordia describes Huawei and Nokia Siemens Networks as “current partners” on its website.
Moody’s said in a statement that the acquisition would not change Ericsson’s A3/P-2 credit rating since it still had a “cash cushion” of SEK83bn (US$13bn), and because the acquisition is expected to be accretive to earnings.
Reuters reports that Ericsson was advised by Evercore Partners, while its legal adviser was Paul, Weiss, Rifkind, Wharton and Garrison. Credit Suisse advised Telcordia, whose legal adviser was Wilkie Farr & Gallagher.
Ericsson and Telcordia did not reply to questions before the press deadline.
