& cplSiteName &

Ericsson Eyes Takeovers to Bolster Digital Services Unit

Iain Morris
5/15/2017
50%
50%

NICE, France -- TM Forum Live -- Ericsson is considering buying companies that could strengthen its digital services business and is predicting a "tangible turnaround" at the ailing unit next year.

Speaking to Light Reading on the sidelines of this week's TM Forum Live event in Nice, Ulf Ewaldsson, who heads up the recently formed digital services business area, revealed that takeover activity could figure in the Swedish vendor's strategy if it helps Ericsson AB (Nasdaq: ERIC) to be "the partner of choice for customers digitalizing their systems."

The news comes several weeks after a strategic update during which Ericsson said it would focus on restoring profitability by "doubling down" on core activities, which appear to include the OSS and BSS business.

Ericsson has been hit by a downturn in the network equipment industry, with major customers scaling back their spending following a wave of investment in mobile broadband infrastructure. It expects the addressable market for radio access network (RAN) equipment to shrink at a rate of between 2% and 6% this year. (See Ericsson's Q1 Even Worse Than Feared.)

Ewaldsson hinted that acquisition targets could include companies focused on revenue and customer management, as well as players in the analytics and automation areas.

"We see a big focus on customer experience … revenue management and customer management systems," he said in commenting on the development of the market. "I'm using words deliberately here because it is changing from traditional customer care systems to customer management systems. And the other area where we see traction is in new types of OSS [operational support systems] based on analytics and automation."

Revenues from billing support systems (BSS) and OSS, which were previously reported as "support solutions" but now sit within Ericsson's cloud and IT division, shrank by 17% last year, to about 12.5 billion Swedish kroner ($1.4 billion).

The unit also made an operating loss of about SEK1 billion ($110 million), compared with a profit of SEK1.5 billion ($170 million) in 2015, prompting some analysts to question Ericsson's commitment to the business.

While the company has hinted at potential divestments of its media and cloud hardware assets, it has insisted that BSS and OSS is of "strategic" importance.

Ericsson has blamed the decline at that business on lower sales of legacy products, but Ewaldsson is aiming for a big improvement over the next 12 to 18 months.

"The digital business results were not so flattering," he says. "That is not because the idea of digital services is wrong, but we do need to focus the portfolio on new investments and get out of some of the legacy. We expect a tangible turnaround in 2018."


Want to know more about cloud services? Check out our dedicated cloud services content channel here on Light Reading.


The comments come several weeks after James Crawshaw, a senior analyst with the Heavy Reading market research group, said Ericsson needed to start buying some innovative players to make a success of its OSS and BSS strategy. (See Ericsson Must Hit M&A Trail to Boss B/OSS – Analyst.)

"What kind of companies should they buy?" Crawshaw wrote in a comment on the Light Reading website. "Something to help operators manage inventory in a dynamic environment like NFV (the legacy systems can't cope), something to help operators provide a cool consumer-facing front end to the BSS to enable self care, and something to help increase the automation of network management."

The suggestion that Ericsson is on the takeover trail could prompt concern among investors: The company built up its media and TV business largely through takeover activity, and yet the loss-making division has evidently struggled to make an impact.

On the other hand, attractive takeovers might help to restore some confidence in Ericsson's growth prospects. Ratings agency Moody's recently downgraded the company to junk status out of concern it remains too focused on cost cutting and profitability.

"They have the right to be concerned," said Ewaldsson when asked about his reaction to that downgrade. "Our performance is not where it should be and we are not satisfied.

"In the area of digital services a lot of effort needs to go into streamlining the portfolio and making sure we have more efficient service delivery," added Ewaldsson. "We also need to invest enough in new systems to make them pick up even faster."

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
From The Founder
Kicking off BCE 2017, Light Reading founder Steve Saunders lays blame for NFV's slow ramp-up and urges telecom to return to old-fashioned standards building and interoperability.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Women in Comms Introduction Videos
Infinera's Sales Director Paints Tech's Big Picture

6|21|17   |   4:14   |   (1) comment


Shannon Williams, Infinera's director of sales, shares how she achieves work's many balancing acts -- between her role and the broader company, today and tomorrow's tech and more.
LRTV Custom TV
SD-WAN Innovation & Trends

6|20|17   |     |   (0) comments


Versa CEO Kelly Ahuja discusses with Carol Wilson the current status and trends in the SD-WAN market, Versa's innovation around building a software platform with broad contextualization, and the advantages that startups can bring to the SD-WAN market.
LRTV Interviews
Ovum's Dario Talmesio on 5G in Europe

6|20|17   |   02:16   |   (0) comments


At 5G World 2017, Dario Talmesio, principal analyst and practice leader on Ovum's fixed and mobile telecoms European team, explains the emerging trends amongst European operators as they prepare for 5G.
LRTV Custom TV
Putting Power on a Pedestal

6|19|17   |     |   (0) comments


ARRIS's John Ulm says a major accomplishment of SCTE•ISBE's Energy 2020 program is increased focus on power cost and consumption, including inclusion of energy requirements in operators' RFPs and RFIs.
LRTV Custom TV
Gigabit Access: The Last-Mile Pipe for All Future Services

6|19|17   |     |   (0) comments


A Gigabit access platform being deployed today must be able to deliver all types of services to an increasing number of devices. A non-blocking architecture is necessary to support the ever-increasing growth in bandwidth demand. The Huawei Gigabit access solution is based on a distributed design that is fully scalable to deliver a unprecedented performance.
LRTV Custom TV
Key Factors to Successfully Deploy an SD-WAN Service

6|19|17   |     |   (0) comments


As service providers transition their SD-WAN solution from trials and limited deployments into production at large scale, there are important considerations to successfully operationalize these solutions and realize their full potential, without adding complexity, introducing uncertainty or disrupting current business operations. Sunil Khandekar, CEO and Founder ...
LRTV Custom TV
IoT Solutions: Rational Exuberance

6|19|17   |     |   (0) comments


IoT solutions are morphing from hype into viable business opportunities. Huawei has the platform and ecosystem support to help carriers successfully address new business opportunities in the IoT space.
LRTV Custom TV
Realizing ICN as a Network Slice for Mobile Data Distribution

6|19|17   |     |   (1) comment


Network slicing in 5G allows the potential introduction of new network architectures such as Information-centric Networks (ICN) as a slice, managed over a shared pool of compute, storage and bandwidth resource. Services over an ICN slice can benefit from many architectural features such as Name Based Networking, Security, Multicasting, Multi-homing, Mobility, ...
LRTV Interviews
Ovum's Mike Roberts on 5G Uptake

6|19|17   |   04:08   |   (0) comments


Mike Roberts, research director for Ovum's service provider markets group, explains why he has boosted his 5G subscriptions forecast.
LRTV Interviews
AT&T's Hubbard on Intersection of SD-WAN & MPLS

6|15|17   |     |   (0) comments


Rick Hubbard, SVP of Network Product Management for AT&T Business Solutions, discusses how AT&T's approach to SD-WAN fits in with its overall virtualization strategy, explains how SD-WAN can improve enterprise customers' use of the cloud and addresses the intersection of SD-WAN and MPLS.
Telecom Innovators Video Showcase
Keep Connected IoT Devices Under Control With Allot

6|15|17   |     |   (0) comments


Allot AVP of International Pre-Sales, Daniel Keidar, explains how communications service providers can protect infrastructure and service availability from flooding attacks caused by malfunctioning or bot-infected devices connected to their network.
LRTV Custom TV
ZTE 5G World Highlights

6|15|17   |     |   (0) comments


ZTE showcases its leading 5G innovations at 5G World in London.
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Verizon Warns of $500M Hit From Yahoo Deal
Iain Morris, News Editor, 6/16/2017
Netflix's Lesson in Culture Expectation Settings
Sarah Thomas, Director, Women in Comms, 6/21/2017
Kalanick Steps Down as Uber CEO
Sarah Thomas, Director, Women in Comms, 6/21/2017
BT Tech Chief Makes Plea to 5G Chip Vendors
Ray Le Maistre, International Group Editor, 6/20/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.