Doug on IP Comm – An independent voice on VoIP, telecom, and IP Communication

Posts Tagged ‘M&A

Having bought up every other VoIP apps company it could get its hands on, BroadSoft is in the process of acquiring privately-held QoS monitoring firm Packet Island.   Hmmm…

BroadSoft says the acquisition is being made to address “the critical need” for ensuring QoS and QoE (quality of experience) for real-time (i.e. phone and video) communications.  The company gets an expanded portfolio to offer its existing (large, over 450 service providers) customer base of carriers, so service providers in turn can offer enhanced QoS assessments and monitoring of services and deploy VoIP and video services with guaranteed end-to-end carrier-grade service delivery.

Packet Island’s solutions offer lifecycle management for QoS/QoE, so you run them before deploying VoIP and video, do the deployment and run them to establish a baseline, then monitor and reassess (i.e. recurring revenue) on a periodic basis. There’s also the usual troubleshooting tools for pinpointing problems and some buzzwords throw in about “cloud” monitoring and DPI technology.

Terms of the deal were, of course, not announced between the two companies, but BroadSoft says it is keeping all Packet Island employees while Packet Island founder and CEO Praveen Kumar will be parked,er assume the role of BroadSoft’s chief Technologist if I’m interpreting the press release correctly.

Hmm….

OK, so BroadSoft gets a set of products and services (services = recurring revenue good) to offer its universe of carriers, but this is a couple of steps out of the company’s traditional VoIP application server space. Of course, BroadSoft has bought up pretty much all the other VoIP application server players (Sylantro, GENBAND), so it has to do something to continue to grow.  It would be interesting to know the terms of the deal, since BroadSoft acquired Sylantro at a firesale price (stock swap, assumption of debt).  If BroadSoft paid out cash,  that would have been one indicator (i.e.  generating cash so they can go buy firms). If it is a stock delay, that’s another indicator.

Regardless, it appears BroadSoft is starting to expand its taste for acquisitions so don’t be surprised to see a couple of more deals go down in the months to come.

News reports across the wire are repeating comments by a Nokia Siemens Network (NSN) official who said the company might bid on other Nortel assets as they become available.  Meanwhile, vulture capital firm MaitlinPatterson Global Advisors is proportedly building a “dream team” of executives to advise on reorganizing and running Nortel if it wins its bid for the firm.

The Financial Times reports MaitlinPatterson’s team includes former Nortel North American President  Dion Joannou, Richard Burns, a former president of AT&T’s wireless network, Richard Piasentin, a former group vice-president of sales for Nortel, Tony Pirih, former head of Nortel’s R&D operations, and Chris Smith, former executive vice-president in charge of Alltel’s network operations.

Meanwhile, Seeking Alpha comments on NSN North American president Sue Spradley standing center stage touting why her company is the best one to acquire Nortel’s CDMA and LTE parts. Speaking in Toronto yesterday, Spradley indicated that NSN could put more money on the table for the pieces if it’s needed to stay in the bid process; doing so would make it the #2 network supplier in North America, ahead of Ericsson.

Once NSN gets the CDMA and LTE pieces, it will look at other Nortel assets as they come to market and if it sees a good price for them, it’ll grab them.

There’s some interesting micro and macro factors illustrated in these comments.  Micro: NSN is not backing down for what it wants and it will be interesting to see if it and MaitlinPatterson cut a deal either before bidding closes or, if Maitlin ends up with all of Nortel, afterward.   And if you’re looking for a good signal of an economic leveling, the potential for NSN and MaitlinPatterson to duke it over Nortel’s assets could qualify.

Frontier has an uphill battle selling this deal to regulations and its own shareholders.  The ghost of the Verizon/FairPoint deal in Northern New England is going to loom strongly for anyone who followed the train wreck when FairPoint switched over its back office systems from Verizon’s rentals to its own gear. Also the not-so-little matter that FairPoint has had cash problems.

:et’s not forget the sheer size of this deal: In one fell swoop, Frontier is going to more than triple the number of landline customers it has, along with picking up 110,000 FiOS Internet customers and 69,000 FiOS TV cusstomers.

Before the deal, Frontier had around 2.2 million landlines. It adds 4.8 million new landlines for a total of 7 million. Sure, Frontier is going to get 11,000 former Verizon employees to handle it all, but don’t expect smooth sailing by any stretch of the imagination.

Frontier, however, may be better able to learn from FairPoint’s mistakes, especially in transitioning over customers from Verizon’s email systems and other customer service areas.

As you’d expect, Frontier is confident it can triple the number of landline subscribers it has without breaking a sweat and integrate in those 11,000 employees.

Wall Street seems to like Frontier’s move, but we’ll see how long that lasts once the transition reports start coming in.

Earlier today, Verizon announced it was selling off 4.8 million access lines in 14 states — rural areas — shedding 11,000 employees, and expecting to clear around $8.6 billion, between losing debt associated with the operations and a Frontier stock “dividend” paid to its shareholders.

OK, what’s not to like?

While this may be the biggest shedding deal Verizon has conducted, it continues the company’s pattern of selling off rural/slow-growth/no-growth business a la Hawaiian Telecom and its Northern New England wireline ops.  In all cases, it’s been the wireline, consumer business that’s been tossed, while the company keeps its wireless chips.

About the only selling job that Verizon has to do is to convince shareholders that this is a Good Thing and Frontier stock won’t end up with FairPoint transition problems.

Regulators in affected states will likely complain and moan about how Big Bell is leaving them behind and make note that the Verizon/FairPoint transition didn’t do so hot.  Expect some growling from Senators and Congressmen in affected states, but at the end of the day, it’s difficult to see how anyone could de-rail the sale.


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