Ericsson Sees Possibility of Network Acquisition With Partners
Ericsson AB, the world’s largest supplier of wireless networks, said it may acquire network assets in partnership with financial investors.
Some telecommunications operators “would like to offload part of the networks to a third party -- that could be Ericsson plus a financial company,” Valter D’Avino, vice president of managed services, said at a Morgan Stanley conference in Barcelona today.
Ericsson, based in Stockholm, is the biggest provider of managed services to telephone operators. It has signed more than 300 contracts including extensions and expansions since 2002, making it responsible for 750 million subscribers worldwide, Josephine Edwall, a spokeswoman, said in an interview. Ericsson signed 38 contracts through the first nine months of the year including renewals and expansions. It generally doesn’t own the network hardware it manages.
“We could eventually take over part of the network with a partner and transform” capital expenditure to operational expenditure, D’Avino said. “Ericsson isn’t interested in pure leaseback that is one-to-one. What would be interesting for us is real sharing, using the transmission capability to serve other customers as well.”
The model is Ericsson’s “one-to-many” practice in network management, when it acquires employees from a customer and trains them to work on other networks as well, he said. The company has already managed consolidations where companies merge their networks while retaining ownership.
Management Customers
Ericsson’s network management customers include Sprint Nextel Corp., Vodafone Group Plc’s German unit, and China Mobile Ltd., as well as some of Hutchison Whampoa Ltd.’s 3- branded mobile businesses. Managed-services agreements are typically for five to seven years, with profitability increasing over the contract. The company also sells network management to utilities and television stations.
Africa is a promising area for the services, D’Avino said.
“We are discussing it especially with multicountry operators,” he said, mentioning Emirates Telecom Corp.’s Etisalat, Zain and Bharti Airtel Ltd.
Ericsson said Nov. 8 it signed its first managed-services contract for a so-called fourth-generation network, in connection with an order from TDC A/S, Denmark’s biggest phone company. Fourth-generation networks provide higher speeds for data transfer to mobile computers and other devices, typically while also providing lower-speed networks for phone conversations and data on the same base station.
Revenue Increase
The company, which traces its roots to a telegraph repair shop opened in 1876, has signed eight contracts for commercial LTE-technology networks, including deals with Verizon Wireless and AT&T Inc. in the U.S. Ericsson operates four global service centers, in Romania, India, Mexico and China.
Ericsson recorded 15.8 billion kronor ($2.3 billion) in sales of managed services in the first nine months of the year, a 28 percent increase from a year earlier. Third-quarter revenue from managed services climbed 46 percent to 5.2 billion kronor, boosted by the Sprint contract.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Vidya Root in Paris at vroot@bloomberg.net
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