Ericsson is in talks with both AT&T and Verizon Wireless about managing their wireless infrastructure, according to an executive who shared details with the Bloomberg news agency.
Jean-Claude Geha, head of Ericsson AB (Nasdaq: ERIC)'s managed services business, tells Bloomberg the vendor is in discussions with AT&T Inc. (NYSE: T) and Verizon Wireless about managed services, but he wasn't clear what aspects of the network they were interested in turning over to the vendor.
He did, however, note that there is "growing interest in outsourcing more traditional day-to-day operations and the running of network infrastructure."
Semantics aside, Current Analysis analyst Ed Gubbins says he wouldn't expect the vendor to take over all of the day-to-day network management operations. Rather, Gubbins notes that Ericsson has done a lot of work for major operators in managing network transformations, including data center transformations.
"And the larger trends toward SDN and NFV include transformations that provide a lot of opportunity for vendors' managed services businesses," the analyst adds in an email to Light Reading. Ericsson has also been touting its small cell managed services, but Gubbins says AT&T likely isn't interested in help there. (See Ericsson Launches Small Cell as a Service.)
Ericsson does already provide complete network management for Sprint Corp. (NYSE: S) in the US and manages T-Mobile US Inc. 's OSS/BSS, but winning the big two in any capacity would be a major blow to competitors Nokia Corp. (NYSE: NOK), Alcatel-Lucent (NYSE: ALU), and Huawei Technologies Co. Ltd. (See Ericsson, Sprint Enter Agreement and T-Mobile Swaps Out Amdocs BSS for Ericsson .)
Huawei, especially, has been making a big push into managed services, increasing its revenue 21% in 2013, more than Ericsson did, Gubbins notes, which could be why Geha is letting these "talks" slip. A win in North America, where its Chinese competitor doesn't have a strong presence, is a positive competitive development. (See Ericsson Reports Q1 and Huawei's Operating Profit Soars.)
All of the big equipment vendors have shifted their priorities away from hardware to software and services as their operator customers shift their focus as well. Ericsson, in particular, has made a name for itself in 4G know-how and SPIT-related managed services capabilities, which likely sparked the interest of AT&T and Verizon as they're thinking about evolving their LTE networks and crafting new policy-driven services.
Of course, what will be interesting to watch now is whether Ericsson's competitors will come forward citing their talks with the big two as well. Heavy Reading analyst Sarah Wallace, author of the recent report A New Era of BSS/OSS Managed Services, points out that Amdocs Ltd. (NYSE: DOX) has roots in AT&T and the rest of the market is vying to help Verizon replace many of its homegrown systems, so it's plausible they are all holding discussions. (See AT&T Adds Amdocs, Juniper to Cloud Roster.)
For its part, Ericsson is forecasting an increase in managed services revenue this year, as Geha says it sees increased interest in outsourcing across the globe. Today it announced new managed services business in Romania with branches of the Greek national operator OTE S.A. , which is 40% owned by Deutsche Telekom AG (NYSE: DT). (See Ericsson Wins Managed Services Deal in Romania and Ericsson Wins Managed Services, Kit Deal in Myanmar.)
Ericsson's stock was up slightly, by 0.5% to $12.14, in Tuesday morning trading.
— Sarah Reedy, Senior Editor, Light Reading