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NEC is reportedly eyeing a bid for billing vendor CSG Systems, which counts Charter and Comcast as its two biggest customers. But the details are unclear.
NEC is reportedly eyeing a takeover of CSG Systems. The move could give the Japanese technology firm a firm foothold inside big CSG customers like Comcast and Charter Communications in the US.
However, there's an ongoing debate over the wisdom of an NEC purchase of CSG.
"Why NEC would do this when it already owns Netcracker Technology is unclear," wrote James Crawshaw, an analyst with Omdia (a Light Reading sister company), on social media. "Taking out a competitor would do a massive favour to Amdocs while NEC itself would see marginal benefit."
Others cheered the move.
"Today, telcos want a one-stop-shop – a fully integrated solution that simplifies operations, ensures interoperability, and accelerates time to market," wrote Hamish White, head of telecom consulting firm Mobilise, on social media. "That's why NEC's reported bid to acquire CSG Systems International is more than just another M&A deal. It's a strategic move that reflects the ongoing consolidation in the BSS/OSS space and a broader industry shift toward end-to-end solutions."
White said NEC might be pursuing CSG in order to flesh out its existing BSS systems, to access CSG's customer base, and to create more seamless products.
According to Reuters, which first reported the rumor, CSG Systems has been actively seeking a buyer, and that NEC is working with Morgan Stanley on a possible bid. However, the publication noted that merger discussions are still in preliminary stages, and they could still fall apart.
NEC and CSG declined to comment to Reuters.
The wider context
According to Global Market Insights, Accenture and Amdocs are the market leaders in OSS (operations support systems) and BSS (business support systems). Other big players include Ericsson, Huawei and Nokia.
The firm added that the global OSS/BSS market totaled $67.7 billion in 2023 and stands to grow at 12.5% through the next several years.
CSG, for its part, is based in Colorado and has a market capitalization of $1.6 billion. The company reported revenues of almost $300 million in the third quarter of last year, up almost 3% from the year-ago period.
Comcast and Charter – the two biggest cable companies in the US – each account for 20% of CSG's revenues. EchoStar's Dish Network is listed as another big customer, though CSG didn't say how big EchoStar is.
Importantly, CSG said that it entered into a new contract with Comcast in October 2024, a deal that stretches until 2030.
NEC, meanwhile, commands a market capitalization of more than $23 billion, and its business stretches across a wide range of IT functions. However, Crawshaw, the Omdia analyst, noted that NEC indicated little change to its telecom services business (which includes Netcracker) in its most recent quarterly report.
Indeed, during the company's quarterly conference call this week, NEC officials reported that costs in the company's telecom business increased due to delays with multiple existing projects. But they anticipate that situation to smooth out in the months to come, and they said they still expect "significant upside" in the business.
"We're seeing a wave of consolidation in telecom software – Amdocs, Ericsson and other big players have been expanding their portfolios to meet telco demands for fewer vendors and more integrated solutions," summarized White, of the firm Mobilise. "If NEC follows through on the CSG deal, it would be a significant step towards becoming a true full-stack vendor in the telco software space."
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