Ericsson acquisition of Telcordia to boost OSS/BSS strength

Ericsson (NASDAQ:ERIC) has reached an agreement with Providence Equity Partners, LLC and Warburg Pincus to acquire 100 percent of the shares of Telcordia, the former Bell Communications Research, that specializes in mobile, broadband and enterprise communications software and services. Ericsson will pay $1.15 billion in the deal, which is expected to close in the fourth quarter of this year.

The acquisition of Telcordia will significantly strengthen Ericsson’s status in the growing operations support systems/business support systems (OSS/BSS) market, the company believes. According to figures Ericsson provided, the market for software and systems integration in 2010 reached $35 billion and is expected to show a compound annual growth rate between 6-8 percent between 2010 and 2013. The need for operators to efficiently handle the growth in mobile and fixed broadband traffic, as well as new types of connected devices, services and applications, while meeting customers’ expectations is expected to drive this growth.

In addition, what Ericsson termed “an attractive market for outsourced and hosted managed services,” should grow at a similar rate.

Telcordia, headquartered in Piscataway, NJ, generated revenues of $739 million during the last fiscal year ended January 31, 2011 and employs more than 2,600 people. The company was founded as Bell Communications Research in 1982 as part of the breakup of AT&T. The standards it generated for the Regional Bell Operating Companies remain in use, particularly among carriers in North America.

"The importance of operations and business support systems will continue to grow as more and more devices are connected, services become mobile and new business models for mobile broadband are introduced,” according to Hans Vestberg, president and CEO, Ericsson. “In this context, Telcordia brings very skilled people and knowledge, a large business in North America and other markets, as well as a good multivendor product portfolio."