Light Reading

AT&T, Verizon Mulling Managed Services With Ericsson

Sarah Thomas
7/1/2014
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Ericsson is in talks with both AT&T and Verizon Wireless about managing their wireless infrastructure, according to an executive who shared details with the Bloomberg news agency.

Jean-Claude Geha, head of Ericsson AB (Nasdaq: ERIC)'s managed services business, tells Bloomberg the vendor is in discussions with AT&T Inc. (NYSE: T) and Verizon Wireless about managed services, but he wasn't clear what aspects of the network they were interested in turning over to the vendor.

He did, however, note that there is "growing interest in outsourcing more traditional day-to-day operations and the running of network infrastructure."

Semantics aside, Current Analysis analyst Ed Gubbins says he wouldn't expect the vendor to take over all of the day-to-day network management operations. Rather, Gubbins notes that Ericsson has done a lot of work for major operators in managing network transformations, including data center transformations.

"And the larger trends toward SDN and NFV include transformations that provide a lot of opportunity for vendors' managed services businesses," the analyst adds in an email to Light Reading. Ericsson has also been touting its small cell managed services, but Gubbins says AT&T likely isn't interested in help there. (See Ericsson Launches Small Cell as a Service.)

Ericsson does already provide complete network management for Sprint Corp. (NYSE: S) in the US and manages T-Mobile US Inc. 's OSS/BSS, but winning the big two in any capacity would be a major blow to competitors Nokia Corp. (NYSE: NOK), Alcatel-Lucent (NYSE: ALU), and Huawei Technologies Co. Ltd. (See Ericsson, Sprint Enter Agreement and T-Mobile Swaps Out Amdocs BSS for Ericsson .)

Huawei, especially, has been making a big push into managed services, increasing its revenue 21% in 2013, more than Ericsson did, Gubbins notes, which could be why Geha is letting these "talks" slip. A win in North America, where its Chinese competitor doesn't have a strong presence, is a positive competitive development. (See Ericsson Reports Q1 and Huawei's Operating Profit Soars.)

All of the big equipment vendors have shifted their priorities away from hardware to software and services as their operator customers shift their focus as well. Ericsson, in particular, has made a name for itself in 4G know-how and SPIT-related managed services capabilities, which likely sparked the interest of AT&T and Verizon as they're thinking about evolving their LTE networks and crafting new policy-driven services.

Of course, what will be interesting to watch now is whether Ericsson's competitors will come forward citing their talks with the big two as well. Heavy Reading analyst Sarah Wallace, author of the recent report A New Era of BSS/OSS Managed Services, points out that Amdocs Ltd. (NYSE: DOX) has roots in AT&T and the rest of the market is vying to help Verizon replace many of its homegrown systems, so it's plausible they are all holding discussions. (See AT&T Adds Amdocs, Juniper to Cloud Roster.)

For its part, Ericsson is forecasting an increase in managed services revenue this year, as Geha says it sees increased interest in outsourcing across the globe. Today it announced new managed services business in Romania with branches of the Greek national operator OTE S.A. , which is 40% owned by Deutsche Telekom AG (NYSE: DT). (See Ericsson Wins Managed Services Deal in Romania and Ericsson Wins Managed Services, Kit Deal in Myanmar.)

Ericsson's stock was up slightly, by 0.5% to $12.14, in Tuesday morning trading.

— Sarah Reedy, Senior Editor, Light Reading

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Pete_S4
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Pete_S4,
User Rank: Light Beer
7/2/2014 | 9:47:20 AM
Not going to happen.
I watched how well Ericsson taking over Sprint's network worked for years in a support role for one of their larger vendors at the time.  The team was demoralized and it showed in the way the network was run and proably still is.  I saw situations where Eningeers working for Ericsson couldn't be bothered to buy required expansion equipment from Ericsson itself.  I assure you at least someone at Verizon or AT&T is keenly aware of this.  
Ray@LR
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Ray@LR,
User Rank: Blogger
7/2/2014 | 4:17:57 AM
Re: Ericsson statement
It wasn't implied - it was specifically stated.

I can't help thinking Geha had either a rush of blood to the head or a scheme he thought was cunning, but which has backfired rather dramatically....
Ariella
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Ariella,
User Rank: Light Sabre
7/1/2014 | 5:32:34 PM
Re: Ericsson statement
I'm sure those two are very happy to hear their rival called out today. From http://www.ftc.gov/news-events/press-releases/2014/07/ftc-alleges-t-mobile-crammed-bogus-charges-customers-phone-bills:

In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., with making hundreds of millions of dollars by placing charges on mobile phone bills for purported "premium" SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.

The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. According to the FTC's complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.
mendyk
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mendyk,
User Rank: Light Sabre
7/1/2014 | 3:41:25 PM
Re: Ericsson statement
I wonder if any accredited university offers a PhD in public relations. It would be really easy to put together a world-class faculty.
SReedy
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SReedy,
User Rank: Blogger
7/1/2014 | 2:31:30 PM
Re: Ericsson statement
And from Verizon PR, "The story is inaccurate.  We do not outsource our network management" However, when I asked about other more narrowly defined outsourcing opps (ie small cells, data center, OSS, etc), he said, "Our statement says it all."

That, of course, means that is all he'll say as the statement says nothing...
SReedy
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SReedy,
User Rank: Blogger
7/1/2014 | 1:25:16 PM
Ericsson statement
Ericsson PR is backpeddaling a bit on Geha's comments to Bloomberg. Their official statement is: 

"Ericsson typically engages in discussions with all our customers regarding all our offerings, including Managed Services.  However, we did not mean to imply that we were in specific discussions with AT&T and Verizon regarding the management of their wireless networks. We apologize for any confusion this may have caused."

mendyk
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mendyk,
User Rank: Light Sabre
7/1/2014 | 1:05:05 PM
Re: Ericsson v. Huawei
Margins in this business have been a challenge. Ericsson seems to be the one supplier that has figured out how to make money here. Interesting if U.S. operators are considering Huawei for managed services, given the paranoia over using their equipment.
SReedy
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SReedy,
User Rank: Blogger
7/1/2014 | 12:41:36 PM
Ericsson v. Huawei
Well-timed news or leak, whichever you prefer, as ABI's latest numbers today have Ericsson and Huawei duking it out for top managed services provider: https://www.abiresearch.com/press/telecom-managed-services-vendors-ericsson-and-huaw
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