LogicaCMG Plays Catchup

LogicaCMG (London: LOG) may have given market leaders Nokia Corp. (NYSE: NOK) and LM Ericsson (Nasdaq: ERICY) a jolt in the MMSC (Multimedia Messaging Service Center) contract battle recently -- announcing six deals since the end of March -- but belief persists that the vendor's successes have come too late to make it a winner in the sector.

LogicaCMG is battling for market share in an industry that is 70 percent controlled by the Nordic giants (see Duo Flexes MMS Muscles). Last year’s merger was an attempt to beef up for future contract tussles and tackle the Scandinavian’s dominance (see Logica and CMG To Merge).

Despite a number of high-profile carrier wins for its hardware, which enables carriers to deliver picture messaging services, analysts believe the market’s big-bucks contracts have already been sown up. LogicaCMG's new customers include KPN Telecom NV (NYSE: KPN) subsidiary E-Plus Mobilfunk GmbH in Germany, Brazil’s Telecom Americas, and India’s largest service provider AirTel (see E-Plus Picks LogicaCMG MMS, LogicaCMG Wins in Brazil, and LogicaCMG Drives Airtel MMS).

“I don’t think there are many new deals to be won,” says Devine Kofiloto, senior research analyst at EMC. “The majority of deals left are in the CDMA world.”

“Most of the big operators have done their deals already,” agrees John Delaney, senior analyst at Ovum Ltd.. “The market is now left with the smaller, Tier 2 carriers to fight over."

LogicaCMG remains upbeat over its future chances in this space, claiming the wins are proof positive that the merger between the two traditional SMS systems stalwarts is starting to pay off. “These recent deals demonstrate the logic of the merger," company spokesman Will Cameron tells Unstrung.

Cameron is convinced that the company’s MMS kit will prove itself to carriers that are fearful of losing brand recognition against the might of the Nokia or Ericsson offerings. “Carriers will want independent vendors. Does Vodafone Group plc (NYSE: VOD) really want to have Ericsson’s logo on its service? We are quite happy being the men behind the scene -- it isn’t that important for us to be seen by the man in the street.”

Both analysts recognize that future market developments could give the vendor a glimmer of hope to gain ground. “Some of these carriers could change vendors as MMS volumes ramp up,” says Kofiloto. “The question is will they be full replacement contracts or side-by-side implementations?”

Telecom Italia Mobile SpA (Milan: TIM) (TIM) and Norway’s Telenor ASA (Nasdaq: TELN) are Europe’s first two operators to have carried out a multi-vendor deal. TIM is using all three leading players, having signed Nokia and Ericsson before adding LogicaCMG’s kit at a later stage. “They needed a third vendor because they were still finding messages going down the pan,” says Delaney. “The issue of reliability and scaleability does seem to be a problem with this equipment and could be a reason for operators to look around for further suppliers.”

However, this won’t be a worthwhile venture in the short term, warns Kofiloto. “With low traffic volumes for MMS I don’t believe it is a smart move for a vendor to become involved in a multi-vendor deal at present. The carriers are not yet utilizing full capacity.”

LogicaCMG’s Cameron is keeping the faith. “This will not be the duopoly that SMS messaging became [a market dominated by Logica and CMG]. We are confident that our platform independence will make our MMS offering powerful.”

— Justin Springham, Senior Editor, Europe, Unstrung