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Redknee’s ‘audacious’ Nokia Siemens deal

Rafal Gerszak/The Globe and Mail

As Nokia Siemens Networks BV focuses on its core mobile broadband division, it is selling another business arm to Mississauga, Ont.'s Redknee Solutions Inc. The purchase price, however, is far less than was expected when rumours of a sale emerged a few months ago.

Redknee said Wednesday it would acquire Nokia Siemens' business support systems unit, which provides billing and customer care software for communications companies. The deal could be worth up to $52-million, including the transfer of roughly 1,200 staff, and is expected to close next year.

It's a purchase one analyst called "audacious."

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Speculation first arose that the business unit might be sold in late August, and insiders thought it might fetch as much as $388-million at the time. Companies such as Ericsson AB were marked as potential buyers, as were some private equity groups.

So when Redknee scooped up the business for about 13 per cent of that estimated price, it raised some eyebrows. The price gap raised the question of just how profitable the BSS business division is. Redknee couldn't answer this question directly when asked on the call, but Redknee chief financial officer David Charron said he believed the business would be profitable.

On the investor call following the announcement Wednesday morning, Redknee said the deal will give it some access to patents. Moreover, it will increase Redknee's global reach by adding BSS's 130 communication service providers as clients. Roughly half of these are classified as top global mobile operators, an area in which Redknee has said it wants to expand.

Currently, Redknee's software is used by 90 network operators in more than 50 countries.

The transition is expected to take one to two years, and Redknee will pay $19-million upfront in cash for BSS, and up to $32-million later in performance-based payments between 12 to 36 months after closing.

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About the Author
Financial Services Reporter

Jacqueline Nelson is a financial services reporter at the Report on Business. Prior to that she was a staff writer at Canadian Business magazine, covering news and writing features on a wide variety of subjects. More

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