Hans-on: Ericsson CEO talks about Telcordia acquisition

In a market where the majority of players up and down the value chain are increasingly motivated to partner up for different types of expertise rather than build in-house bulk, Swedish infrastructure and services vendor Ericsson continues to broaden its offering. Its latest acquisition, which will see it pay $1.15bn for OSS/BSS player Telcordia, will beef up its billing and OSS play, although CEO Hans Vestberg tells Telecoms.com that the drivers for the purchase were twofold.

“It’s definitely a two-pronged thing,” he says. “Telcordia has a legacy business with all of the top-tier wireline operators in North America, and that’s a great asset to have. On the other hand we are getting products that are complementary to our OSS/BSS offering that we can bring to our go-to-market model for the 174 other countries where we are present.”

Vestberg emphasises that Telcordia is already present in 55 markets but analysts have suggested that the firm’s historical US bias might make it a difficult sell outside of its core market, with buying habits slow to change. So does Vestberg worry about this? “Operators are taking time to swap out and swap in their business IT systems,” he says, which is an issue. But he argues that Telcordia has hitherto lacked the scale to fully exploit its product offering. “They haven’t had the capability to do more than just sell software,” he says. “We’re sitting in all these markets, plus we have a service arm that can do a lot of the integration.”

Telcordia isn’t Ericsson’s first BSS-related acquisition; the Swedish firm picked up German billing firm LHS in 2007. But Vestberg says there is no concern about overlap between new and existing offerings. The two firms’ BSS customer bases are totally different, he says, and with this in mind, he adds: “we expect to keep all of the Telcordia portfolio.”

Large scale acquisitions always give cause for unrest among the workforce that forms part of the assets for sales. Vestberg says there is no contractual obligation for Ericsson to retain the 2,600 Telcordia staff that Ericsson will absorb as part of the deal and concedes that Ericsson “always look for efficiencies” when making acquisitions. And while he stops short of guaranteeing that there will be no cuts in headcount, he does offer some comfort to Telcordia staff. “This is an acquisition for growth and our main aim is to get these products out on a worldwide basis. This is not built on a ‘cost-out’ model.”

Despite Ericsson’s readiness to make acquisitions on this scale, Vestberg says that M&A is not the primary focus of the firm’s strategy. “We believe that organic growth is best,” he says, breaking down the firm’s plans into three focus areas; portfolio growth, market share and M&A. Vestberg is deliberately vague on any future target areas. “We don’t have holes in our portfolio so much, but we are looking in certain areas.