Following a flurry of coverage last week about Starent's role in Verizon Wireless 's future mobile broadband network, questions have surfaced about the independent packet core specialist's role with its key customer, and about its growth strategy.

One possibility is that, following a financially successful 2008, and with mobile data traffic growth set to expand its market potential, Starent could bolster its capabilities with a bolt-on acquisition.

Verizon deal under the spotlight
In Verizon's proto-4G Long-Term Evolution (LTE) network, Starent is one of three Evolved Packet Core (EPC) suppliers, the other two being Alcatel-Lucent (NYSE: ALU) and Ericsson AB (Nasdaq: ERIC). (See MWC 2009: Verizon Picks LTE Vendors and MWC 2009: Starent Dines on LTE.)

Starent, in effect, is losing its privileged position at Verizon Wireless, where it has been the sole packet core technology supplier in the CDMA operator's 3G network.

The realization that Starent was losing its sole supplier status at Verizon resulted in the vendor, and its share price, taking some flak last week, as financial analysts appeared to digest for the first time that the company would not be Verizon's sole packet core supplier for LTE. That info coincided with AlcaLu's unveiling of its EPC platform at CTIA. (See AlcaLu Mines IP Smarts for LTE Core.)

Having ended March at $15.80, Starent's stock currently commands $14.64.

In addition, there are unanswered questions about exactly which EPC network elements Starent will provide to Verizon for its LTE rollout, though the same questions remain for Alcatel-Lucent and Ericsson as well.

Both Starent and Verizon declined to disclose any further details about the deal to Unstrung.

According to an analyst note from Deutsche Bank, Starent will be the primary vendor just for the evolved High Rate Packet Data (eHRPD) gateway and Packet Data Network gateway (PDN-gateway), while AlcaLu is likely to provide the Serving gateway and Mobility Management Element (MME). (See CTIA 2009: Verizon's CDMA-to-LTE Helper.)

Looking beyond Verizon
But there's more to Starent than its role at Verizon, highly important though that engagement is to the company's revenues: It is winning other new business; beefing up its packet core platform with extra policy management capabilities; expanding into new service convergence markets; and inaugurating a new EPC platform in R&D. (See Starent Adds Smarts to LTE Core, Starent's Double Whammy, Bouygues Deploys Starent, and Motorola Enlists Starent for 4G Push.)

Starent is unique among the big infrastructure suppliers in that its current packet core platform, the ST40 multimedia core platform, already supports the needs of carriers looking to migrate to LTE, as it has been designed from day one to be software upgradeable to EPC. The vendor's competitors, meanwhile, are preparing new platforms for their EPC network elements. (See AlcaLu Mines IP Smarts for LTE Core and Starent Demos EPC.)

The vendor's recent contract award from Mobilkom Austria AG & Co. KG is an example of the platform's upgradeability. Mobilkom will deploy Starent's GGSN solution on the ST40 for its 3G UMTS networks across its operations in eight countries, with the intention of upgrading to EPC for future LTE networks. (See Mobilkom Picks Starent.)

Starent CEO Ashraf Dahod told Light Reading in a recent video interview (see below) that the ST40 can meet the needs of operators for the "next several years," while a new platform is being developed.

"Starent has the most competitive 3G packet core product on the market today," says Gabriel Brown, senior analyst at Heavy Reading.

The company's technology and market position helped it ramp up its sales last year: Revenues for the full year ended December 31 were $254.1 million, up 74 percent from the previous year, and it generated net income of $60.5 million. (See Starent Reports Q4.)

That made 2008 a good year for Dahod, too: He received a cash bonus of $384,000 for 2008, according to the latest filing with the Securities and Exchange Commission (SEC) . That bonus, plus salary and stock options, brought Dahod's total compensation for 2008 to $1.8 million.

Where does Starent go next?
With a solid position in the 3G and emerging proto-4G packet core sector, Starent can now start to broaden its horizons, and one way to do that is to find technology partners that provide relevant additional capabilities.

Unstrung has learned that Starent has already brokered what looks like a key new partnership, having struck an as yet unannounced OEM deal with converged services gateway startup Mavenir Systems Inc.

Mavenir is supplying the technology, its mOne convergence gateway, which includes Starent's new XT30 Service Convergence Platform, unveiled at this year's CTIA. The XT30 has already landed Starent its first femtocell engagement, a trial with Wisconsin-based Cellcom Inc. (See Femtocells Go to Wisconsin.)

Mavenir CEO Pardeep Kohli confirmed the OEM deal Wednesday, telling Unstrung that the two companies are "working together at a number of customers.”

Mavenir, a 2006 Light Reading Top Ten Startup, specializes in bridging legacy TDM systems in mobile networks with next-generation all-IP systems. That enables operators to offer new multimedia services over their standing infrastructures without having to install a whole new core network.

Mavenir's expertise will be crucial as operators move from third-generation to fourth-generation networks and start to deploy the sort of network architectures needed for femtocell deployments. (See Convergence Specialist Banks $17.5M.)

Even though the Cellcom deal is likely to be small scale, it marks the first commercial result for the companies' joint efforts. Given the initial success and the key convergence function that Mavenir's product performs, should Starent look to acquire Mavenir and bring that technology in-house?

Starent's director of marketing, Andy Capener, wouldn't be drawn on whether there was a prospect of buying Mavenir.

"Right now, we're only talking about a product solution," says Capener.

Mavenir's Kohli was equally circumspect. When asked whether the two companies had discussed an acquisition, he said he couldn't say anything about the relationship between the two companies other than they are working closely together.

Such an acquisition would make sense, though: The converged services gateway looks as if it will have an important role as operators introduce new 3G services and migrate towards 4G networks, and a combination of the two firms would help Starent expand into new applications and expose Mavenir to Starent's customer base of 85 operators.

— Michelle Donegan, European Editor, Unstrung