Managed Services

Will Ericsson Buy Networks?

6:40 AM -- Ericsson AB (Nasdaq: ERIC)'s VP of managed services, Valter D’Avino, has provided a potential next step for managed services players -- to team up with financiers and buy network assets from carriers, reports Bloomberg.

Ericsson is already running hundreds of networks around the world that deliver services to more than 750 million end users. The next step, said D’Avino at a recent Morgan Stanley conference in Barcelona, would be to acquire some network assets that could be used to support multiple service providers. (See TIC Renews Ericsson Managed Services Deal , Ericsson Lands China Unicom Deal , Ericsson Scores German Managed Services Deal, and Ericsson Gets a Brazilian.)

— Gagandeep Kaur, India Editor, Light Reading

Vishnu Goel 12/5/2012 | 4:17:40 PM
re: Will Ericsson Buy Networks?

The Network infrastructure suppliers (earlier known as the NEMs) are providing the Manged Services to the Operators,like in the IT domain the big Computer Companies do for the IT infrastruture users.Their business model creates value for these operators by reducing Opex and eliminates Capex,as the assets are not owned by the operators.After a critical mass is achieved by these Companies(like Ericsson) they themselves will acquire other network assets to leverage them for multi client situations.These Engg Services will help value creation for several players in the chain and new differentiated way of working! Vishnu Goel T&M+919810101238  

miar70 12/5/2012 | 4:17:39 PM
re: Will Ericsson Buy Networks?

Interesting angle, because Ericsson's position has always been that they would not  become competitive with their customers and own/operate their own networks. This would clearly signal a change of direction if this is validated and indicates how life is in the NEM market vs the services business. The ultimate extrapolation... Ericsson re-branding Huawei gear, selling it, owning it, running it and making the money on the services side of the business. NSN is almost there...

joferrei 12/5/2012 | 4:17:38 PM
re: Will Ericsson Buy Networks?

Interesting, and bold move this would be. But I would NOT risk the ongoing commercial relationships with end user service providers, in particular run the risk that these existing SP customer will begin avoiding Ericsson in favor of purely non-competitive technology suppliers, UNLESS Ericsson has what it takes to beat the competition in the end user comms/apps services market. And this includes the competition from ALU and NSN once they would also begin selling directly to end user customers (likely initially only enterprises, rather than individual consumers, but who knows how far they will go).

The critical question here then is: What, if anything, would give Ericsson (or NSN, ALU etc) a decisive competitive differentiator?

In particular, what, if anything, can Ericsson do (eg due to its intellectual property rights) with multiple times better cost efficiency than any other network service provider?

AFAIK, the technological capabilities of Ericsson are not that radically more advanced than the those of its (potential) competitors. But that said, if a vendor did own the rights to a radically more advanced technology that makes a major difference in the cost efficiency of the network services, the service business likely is more profitable than plain selling the technology as product units.

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