ASPEN, Colo.--Despite rumors that Tier 1 operators AT&T (NYSE: T) and Verizon (NYSE: VZ) may be talking to Ericsson about outsourcing the management of their networks, Ericsson (NASDAQ: ERIC) CEO Hans Vestberg said that is a very unlikely scenario because those operators have size and scale and a history of doing it themselves. "I wouldn't believe they would outsource their networks," Vestberg said during an interview with FierceWireless.
However, Vestberg said that doesn't mean that other operators globally are not considering this option. He said that when Ericsson started its managed network business back in 2002, it didn't have any contracts and many people in the industry thought that it was very important for operators to operate their networks.
But the tide has turned. Vestberg says that the managed services business is now a multibillion-dollar business and the company has more than 1 billion subscribers across all its managed networks. "We have a huge slice of the business," he said.
Indeed, ABI Research recently reported that Ericsson and Huawei each hold about 30 percent of the $13 billion telecom network managed services market. The firm said that these vendors, plus Nokia's (NYSE:NOK) networks unit, have done a good job of benefiting from the telecom industry's "rationalization turmoil." Together, all three vendors account for 85 percent of all managed services revenues, according to ABI.
Meanwhile, Vestberg maintains that every operator handles the outsourcing differently--some outsource all of the network, while others outsource only certain parts such as the billing system or OSS. For example, last month T-Mobile US (NYSE:TMUS) signed a long-term managed services agreement with Ericsson, in which Ericsson will supply the operator with its Service Agility package, including unified charging, billing, order management, product catalog and customer relationship management (CRM).
Sprint, of course, is Ericsson's largest U.S. managed network customer. The No. 3 operator inked a deal with Ericsson in 2009 that was valued at $5 billion. As part of the deal, Ericsson assumed responsibility for the day-to-day services, provisioning and maintenance of Sprint's CDMA, iDEN and wireline networks. Sprint, however, retained full ownership and control of the network assets, the network strategy and all network investment decisions.
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