Ericsson outlines high hopes for Technicolor deal

Ericsson voiced its intention to become the “glue” holding broadcast, IT and telecoms services together, as it announced plans to acquire the broadcast services division of Technicolor for €19m ($25m).

Technicolor provides production, postproduction, and distribution services to content creators, network service providers and broadcasters. The firm’s broadcast services division provides play-out services, live production support and media asset management services.

Valter D’Avino, head of managed services at Ericsson, told Telecoms.com that the firm is making the acquisition because it believes that the broadcast, TV and telecoms sectors are converging, in terms of the end user experience.

“Whatever the technology is used to reach the end user; it could be tablets, PCs, smartphones, TVs –but at the end, a significant part of the capacity is used up by video transmission in the mobile networks. This is true on the fixed line side as well, and we are seeing a convergence between these sectors,” he said.

“We believe that we can combine telecoms and IT at the same time. Traditionally, telcos have been served and handled by traditional telco players while IT services have been served by traditional IT players and now broadcasters as well, so we can be the glue, from the services viewpoint, between broadcast, IT and telcos.”

Although Technicolor’s broadcast services division operates in just the Netherlands, France and the UK, Ericsson said that its expertise in managed services and its global scale will entice firms to outsource broadcast services to it worldwide.

“We are present in more than 180 countries, selling managed services in US, China, Asia-Pacific and Africa. This combination can represent a good mix that can convince businesses to outsource even more than they had been planning to. Today, there is a vast amount of customers doing this internally and the market is extremely fragmented,” said D’Avino.

He added that, following this deal, which is expected to be completed mid-2012, Ericsson has no plans to make any more acquisitions in the broadcast space, and aims to grow this side of its business organically.

Technicolor added that the transaction will also contribute to contribute to its focus on reducing its debt level and allocating capital investments to its other activities.

The firm’s broadcast services division has 900 employees managing services to more than 200 channels in France, the UK and the Netherlands. The transaction also includes a potential earn-out based on 2015 revenues of the broadcast services activity of up to €9m, and is subject to the relevant customary regulatory administrative approvals and consultations.