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Ericsson Buys Billing Vendor LHS

Ray Le Maistre
6/5/2007
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Having snared a number of hardware vendors and a messaging specialist in the past six months, Ericsson AB (Nasdaq: ERIC) has now shifted its acquisition focus to the telecom software sector, targeting billing specialist LHS Group in a cash deal worth €310 million ($420 million). (See Ericsson Offers to Buy LHS.)

Ericsson has already secured agreements to buy 75.1 percent of LHS's shares, including deals with the billing firm's major stockholders, General Atlantic Partners LLC , which owned nearly 48 percent, and LHS Beteiligungs AG, which owned 7.2 percent. Now it's offering the same price, €22.50 ($30.42) per share, for the rest of the shares.

The news sent LHS's shares soaring by nearly 13 percent today to close on the Frankfurt exchange at €22.55 ($30.49). Ericsson's stock closed up more than 1 percent at 26.40 Swedish Kroner ($3.83) on the Stockholm exchange.

In the past few months, the Swedish giant has bought router vendor Redback Networks Inc. , fiber access equipment firm Entrisphere Inc. , video processing firm Tandberg Television , and messaging platform vendor Mobeon AB . (See Ericsson Buys Openwave Rival, Ericsson Lands Tandberg TV, Ericsson: Tandberg Is Key to IPTV, Ericsson Buys Entrisphere, and IPTV Drives Ericsson to Redback.)

But billing?

Well, it's not as strange as it sounds, because Ericsson is already a major supplier of pre-paid billing and mediation systems, and, importantly, has a major services business unit that can help carriers implement and run their billing platforms and processes.

During a conference call today, Jan Wareby, senior vice president and head of Ericsson's Multimedia business unit, said the mobile systems vendor holds a 20 percent share of the global pre-paid billing systems market, which is set to grow as the majority of new mobile subscribers in developing countries such as India sign up for pre-paid service packages. In total, Ericsson has 150 mobile operator customers for its pre-paid billing system and 290 mediation system customers. (See Top 10 Emerging Mobile Markets and India Mobile Subs Soar in 2006.)

Of even greater importance in the future, though, is the capability to provide carriers of any type with a convergent billing system – one that can handle both pre- and post-paid customers that are being charged for any services. Such systems enable operators to cut their costs by running a single billing platform, rather than multiple ones, and to offer packages that include both pre- and post-paid services, for example, to families.

This is where LHS, a German firm with about 550 staff members that sells post-paid billing and customer relationship management (CRM) systems, comes into the equation.

LHS has 120 "installations" around the world at fixed and mobile carriers, with negligible overlap with Ericsson's billing customer base. And Ericsson and LHS have already teamed up to provide carriers with convergent billing platforms, so they know their platforms are compatible. (See StarHub Uses LHS, SFR Enables With LHS, LHS Wins Cosmote Deal, LHS Wins in Belarus, LHS Claims Customer Wins, and LHS Wins Billing Deals.)

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