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Aepona Acquisition Adds Telco 2.0 $marts

Ray Le Maistre
7/7/2009
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Service delivery platform (SDP) specialist Aepona Ltd. has acquired Irish payments and settlements system vendor Valista Ltd. in an all-stock transaction (value undisclosed) to add an important element to the Telco 2.0 equation: the ability for carriers and applications developers to charge and invoice customers and partners. (See Aepona Acquires Valista.)

Aepona, one of the SDP specialists that has found a niche and grown during the past few years, has long been touting the idea of the Network as a Service (NaaS), whereby carriers open up their network capabilities to third parties for applications development. (See Service Broker Forum Formed, Aepona Expands for Telco 2.0 Assault, and Aepona & Appium: SDP Minnows Merge.)

And it's had some degree of success, working with operators such as Telus Corp. (NYSE: TU; Toronto: T) and TDC A/S (Copenhagen: TDC). (See AePona Raises $10M, Wins Telus and TDC Commits to Telco 2.0 Strategy.)

What's been missing from Aepona's offering, until now, is an invoice and payments engine, something that's important if the carriers and their applications development partners want to charge for their resources, services, and products.

Adding Valista's capabilities, which includes a PayPal-style payments platform, to the existing Aepona platform will enable operators to bill and collect payments from the partners (developers, retailers, media owners, and so on) that are using their network resources (network capacity, storage, customer profiles, messaging capabilities, and so on), as well as bill and collect payments from end users (individuals and companies) on behalf of those partners.

"As we engaged with our customers we realized we were missing a key part of the equation -- the monetization. Valista is strong in this area with its billing mediation and settlements capabilities," says Aepona's VP of marketing, Michael Crossey, who believes the new, combined company is the only player in the market that can offer a "combination of core network integration, Web Services-based API [application programming interface] exposure, third-party relationship management, billing mediation, and settlement capabilities."

He says the two firms had already been working on some joint bids and realized they needed each others' capabilities to move their businesses forward. And as they had investors in common in Amadeus Capital Partners Ltd. and TVC Holdings, and were located quite close to each other (Aepona in Belfast, Northern Ireland, and Valista in Wicklow, just outside Dublin, in the Republic of Ireland), a marriage "was the obvious move -- we both needed what each other had," says Fran Heeran, Valista's CTO. "To consolidate and grow seemed the obvious way forward." (The Guinness-soaked reception is set to take place somewhere in between the two fair cities...)

But is this a marriage the market needs, or will even care about? Heavy Reading analyst and SDP specialist Caroline Chappell thinks this is a positive move.

"This is an interesting move by Aepona. Valista’s technology allows telcos to bill customers on behalf of third-party service owners, with Valista providing the interfaces into the telco’s customer billing system, the settlement process, and the Web services interface that the service owner can use to transact with the telco, in PayPal/Amazon style," writes Chappell in an email response to questions.

"In future, as services become more ‘mashed up’ and include network capabilities exposed by a telco through an SDP, such as Aepona’s, third-party settlement is going to become more complex. Instead of just billing on behalf of the third party, a telco’s capabilities will be an integral part of the third party's service. Service developers and content owners will need to be billed for their use of network capabilities such as messaging and location, and conventional telco billing systems aren’t set up to handle this at the moment.

"With the acquisition and integration of Valista, Aepona will have a more complete out-of-the-box offer for telcos wanting to build a third-party service developer ecosystem, and it'll be made more compelling because telcos will have a means of monetising the ecosystem’s usage of their capabilities. Being able to make money out of network capabilities is pretty fundamental to telco acceptance of the Telco 2.0 model," concludes the Heavy Reading expert.

It could also help carriers adopt the kinds of business models that some in the industry believe are essential for the future survival of telecom service providers. (See Outlook Cloudy for Telco IaaS, Get On With It!, and Amazon's Lessons for Telcos.)

The 'new' Aepona
The acquisition creates a company, which will retain the Aepona name, that has about 190 staff (120 from Aepona, 70 from Valista) and annual revenues of around $25 million to $30 million, with a high volume of recurring revenues, according to Crossey.

Valista has a number of carrier customers, including Vodafone UK , Orange UK , Orange (NYSE: FTE) wholesale subsidiary w-HA, and U.S. mobile operators Cricket Communications Inc. and U.S. Cellular Corp. (NYSE: USM), for which Valista runs a managed third-party payments service from its own data center. Mobile messaging platform specialist mBlox Inc. is also a customer.

Valista's major rival is Qpass, which was acquired by Amdocs Ltd. (NYSE: DOX) in 2006, along with the big software houses such as HP Inc. (NYSE: HPQ), IBM Corp. (NYSE: IBM), and Oracle Corp. (Nasdaq: ORCL), which can build bespoke platforms for customers, notes Heeran. (See Amdocs Buys Into Content Delivery.)

Both companies claim to be cashflow positive following some recent cost-cutting programs. Valista closed its operations in Japan, for example, and is currently not active in Asia/Pacific. "It's very competitive, a very tough market with low margins," says Heeran. Besides, says Crossey, "it's in Europe and North America where operators are opening up their networks."

— Ray Le Maistre, International News Editor, Light Reading

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