Subex Readies a Rebound

After a tough year the Indian telecom software specialist is gearing up for growth

April 23, 2010

3 Min Read
Subex Readies a Rebound

After a recession-hit year, Bangalore-based telecom software specialist Subex Ltd. is gearing up to boost its sales in both mature and developing markets, and is aiming to increase its revenues in the current financial year (ending March 31, 2011) by 15 to 20 percent.

The company, best known for its telco revenue assurance products, generated revenues of 3.6 billion Indian rupees (US$81 million), down 18 percent year-on-year, during the nine months that ended in December 2009 and is due to report results for the full fiscal year (which ended March 31, 2010) in the coming weeks. (See Subex Enhances Revenue Assurance.)

The company suffered last year not just from the economic downturn, but also from the lingering impact of its 2007 acquisition of Canadian OSS firm Syndesis, which had a suite of IP-based tools ideal for carrier transformation projects. (See Syndesis Strikes $165M Takeover.)

The downturn put many such projects on hold, and left Subex with a larger company, higher costs, and lofty ambitions, but without the business to match. The combination of the downturn and a freeze of carrier projects was, says the company's founder, chairman, and managing director Subash Menon, a "double whammy" that left the company with net losses. (See Subex Targets OSS Giants.)

Now, though, the company has recovered, and hopes to be on the growth path once again. Outlining the strategy for the coming financial year, Menon says Subex will be "focusing on the newly launched Revenue Operations Center [ROC] and managed services in the coming year. We expect the revenues from managed services to improve" during the next 12 months. (See Subex Launches ROCcloud and Subex Expands Managed Services Offering.)

But the growth that Subex, a winner in the Telecom Software section of Light Reading's Top Picks industry recognition program last year, is looking for will need to come from overseas markets, as sales in India are likely to remain limited, and usually generate low margins. (See Light Reading Reveals Its 2009 Top Picks.)

"I don't see the revenue from the Indian market going beyond 5 to 7 percent [of the company's total sales] because pricing is not great in this market. There is a difference of at least 50 percent in prices when compared with [sales in] Africa, and the difference would be more if I compare it with the European market," says Menon. "I don't see any dramatic change happening where the pricing in the Indian market is concerned."

That's not to say Indian carriers have little interest in Subex's range of Service Provider Information Technology (SPIT) products that include provisioning, activation, data integrity, interconnect billing, and cost control software, in addition to the core fraud management platform. (See Subex Intros NGN OSS, Subex Adds to Its OSS, and The SPIT Manifesto.)

In past years, India's operators have paid little attention to their back-office functionality and their OSS and BSS needs. But, as Aircel Ltd. has highlighted, that has changed. (See OSS Virtual Event: Aircel's IT HIT and SPIT Week Spotlight: Aircel's Transformation.)

With the market maturing, the operators are realizing the importance of implementing sophisticated solutions. Intense competition, along with the impending introduction of mobile number portability and 3G services, means the Indian operators are investing more in such solutions. While this means Subex's domestic revenues are set to increase, the low pricing needed to win business in India means that increase won't be substantial.

As to how Subex might help stimulate its international sales, further acquisitions seem unlikely. "In the long term, yes, we might look at acquisitions, but not in the next couple of years. As of now, we don't think we enjoy the kind of profitability" that would fund an acquisition strategy, says Menon.

— Gagandeep Kaur, India Editor, Light Reading

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