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May 1, 2008
VOIP equipment vendor Sonus Networks Inc. (Nasdaq: SONS) is closing in on a potentially lucrative deal with pan-European business services carrier Colt Technology Services Group Ltd , according to a document filed with the Securities and Exchange Commission (SEC) .
Colt, which has a 15,000 kilometer fiber network that connects more than 100 European cities, has been planning a major network transformation for a while. It's believed to have made its Next Generation Network (NGN) technology decisions and identified its preferred suppliers -- and one of them, it would seem, is Sonus.
In the SEC document, filed on April 29, Sonus noted that on Jan. 30 this year, its Audit Committee "approved a transaction for the purchase by Colt Telecommunications of products and services from us."
Why would that need Audit Committee approval? Because Sonus and Colt have a common investor in Fidelity Ventures .
"Fidelity Management & Research and other related Fidelity entities own in excess of 50 percent of the issued share capital of Colt Telecommunications and in excess of 10 percent of our outstanding shares of common stock," noted Sonus in its filing. "The Audit Committee concluded that the transaction would be undertaken in the ordinary course of business and negotiated on terms no less favorable to Sonus than terms that could have been reached with an unrelated third party. The Audit Committee further considered the potential dollar value and benefits to us of the transaction. Accordingly, the Audit Committee determined that the transaction, under all of the circumstances, is in our best interests."
So it shouldn't be a loss leader, then.
But while a transaction has been approved, it seems a deal has not yet been signed. "There can be no assurance that a transaction with Colt Telecommunications will be concluded," concluded the Sonus statement.
Colt wouldn't say if Sonus is set to be one of its suppliers, or confirm information received by Light Reading suggesting that Colt has identified two IP Multimedia Subsystem (IMS) suppliers with which it is looking to strike deals.
"We're still negotiating the NGN contracts," says a Colt spokeswoman.
Several suggestions about the potential value of the Colt deal have come Light Reading's way -- one suggests that it would be worth $4 million in the first year of a multi-year deal, while another suggests the contract would be worth up to $20 million initially over an undetermined period.
While it's not known who the other IMS vendor might be, Light Reading understands that Colt has put carrier Ethernet equipment from Alcatel-Lucent (NYSE: ALU) and Atrica Inc. , now part of Nokia Networks , through their paces with a view to deploying them as part of its new multiservice infrastructure.
For Sonus, which just made its second acquisition in little over a year, the deal would be the latest in a string of European successes that has seen it emerge as the leading specialized supplier of IMS and VOIP systems to carriers migrating to IP-based networks. It would be competing with the likes of AlcaLu, Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , Nokia Siemens, and Nortel Networks Ltd. . (See Sonus Buys OSS Firm, Sonus Fills BT's IMS Hole, Sonus Supports Carphone, Sonus Lands FT Wholesale Deal, Carphone Uses Sonus for VOIP, and Interoute Selects Sonus.)
It also has high hopes of building up its business in Eastern Europe. (See Sonus Eyes Euro Growth.)
Sonus declined to discuss the Colt relationship.
The vendor's share price is up $0.03, or 0.75 percent, to $4.04 today.
— Ray Le Maistre, International News Editor, Light Reading
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