VEON Dumped Ericsson for Amdocs in Russia

BARCELONA -- MWC19 -- VEON's Russian subsidiary, the biggest of its operating companies, has cut Ericsson out of its business support systems (BSS) and opted for a rival IT product developed by Amdocs, Light Reading understands.

A deal between VEON and Amdocs was announced earlier this month, but until now it was unclear if the Russian unit, branded VimpelCom, was using IT systems from both Amdocs and Ericsson.

VEON had signed a $1 billion contract with Ericsson in 2016 for a new "full stack" BSS product called Revenue Manager. Under that contract, the operator planned a radical transformation of its IT systems across 11 countries.

But the project ran into problems while Ericsson was struggling to attract interest from other service providers. Ooredoo in Qatar and T-Mobile Czech Republic appeared to be the only customers besides VEON when Ericsson announced in early 2019 that it would abandon efforts to sell Revenue Manager and channel investment into an older range of BSS products.

At the time, the Swedish equipment vendor said its digital services business, which develops BSS products, would take a financial hit of 7.6 billion Swedish kronor ($820 million), including SEK3 billion ($320 million) in pure write-downs and a total of SEK4.6 billion ($500 million) in restructuring charges.

Ericsson's move left unresolved questions about the BSS relationship with VEON, Ooredoo and T-Mobile. Ericsson previously declined to comment on specific customers, while Ooredoo and T-Mobile did not respond to Light Reading's approaches.

VEON, however, has this week announced a revised agreement with Ericsson under which it will receive $350 million in compensation and work on upgrading IT systems using other products from the Swedish vendor. At today's exchange rates, the amount that VEON is to receive in compensation exceeds the write-downs that Ericsson announced during its last earnings update.

The deal with Amdocs means VEON will not be using Ericsson’s BSS technology in the Russian market.

While the value of the Amdocs contract is not known, the Amdocs BSS product is described by the vendor as a "full stack" offering.

Ericsson blamed weak interest in "full stack" BSS products for its decision to scrap Revenue Manager. "The strategy was based on the assumption that customers would want to do big transformation projects and that did not work out as intended and so it didn't become a very good business for us," said Helena Norrman, Ericsson's chief marketing officer, during an earlier conversation with Light Reading.

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The Swedish vendor insists investments in Revenue Manager have not been entirely wasted, arguing that it will be able to integrate some of the platform's different components into its existing BSS portfolio.

James Crawshaw, an analyst with market research company Heavy Reading, thinks operators will continue to recognize trade-offs between a "best of breed" model -- where a software stack includes products from multiple vendors -- and the "best of suite" approach that Ericsson was pushing.

"The former can potentially bring greater functionality, but the latter gives you one throat to choke, which means that inevitable problems are usually fixed more quickly and cheaply from the operator's perspective," he previously told Light Reading. "Ericsson will continue to push its best-of-suite approach, but instead of it being one highly integrated product it will be separate software systems that are tied together with some middleware."

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— Iain Morris, International Editor, Light Reading