Sprint taps Ericsson in $5bn managed services deal

US carrier Sprint said Thursday it has tapped Swedish vendor Ericsson in a network management deal worth between $4.5bn and $5bn.

Under the agreement Sprint will retain full ownership and control of its CDMA, iDEN and wireline networks, but Ericsson will assume responsibility for the day-to-day services, provisioning and maintenance of the platforms.

The seven year renewable agreement will see around 6,000 Sprint employees transferred to Ericsson during the third quarter of 2009.

While the Swedish vendor will have leeway to optimise Sprint’s existing multi-vendor inventory of assets, such as spare parts and transmission equipment, and provide processes and tools for managing the network platforms and operational support systems, Sprint will retain technology and vendor selections.

The global market for managed network services is forecast to grow to $21.4bn by 2013 with Europe remaining the major market although developing markets and Asia Pacific will also grow strongly, according to industry analyst Informa Telecoms & Media. Europe is expected to generate $8.3bn in managed network services revenues by 2013 with the overwhelming share accounted for by Western Europe.

Operators are turning to network management in the face of tremendous pressure to reduce opex and capex while coping with extreme growth in data traffic. Average cost savings of 20-25 per cent over the life of a contract are a strong driver but not the only one. Whereas two or three years ago the more adventurous operators were typically asking vendors to help them run their networks at reduced cost it is now as much to do with helping them transform their networks and business processes.

Informa says that although network sharing and managed services are often presented as two distinct options, that’s not actually the case. Network sharing creates momentum for managed services because once operators make the leap to infrastructure sharing they become increasingly amenable to exploring further options.