NXTcomm08

NSN Brings Network Outsourcing to the U.S. with the Acquisition of Embarq’s Network Operation Centers

| Jun 16, 2008 | Telecom Infrastructure Services | Show Update

| Analyst: John Marcus

Current Perspective: Positive Vendor Importance: High Market Impact: High

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Event Summary

June 12, 2008 -- Nokia Siemens Networks (NSN) will assume ownership of Embarq Corporation’s voice network operation center (NOC) function for voice traffic monitoring and technical support of its network operations, the first deal of its kind for NSN in North America. In the seven-year agreement, NSN will perform network operations for Embarq’s voice networks, and approximately 265 Embarq employees in the NOCs in Kansas, Tennessee, Florida, and North Carolina will become employees of NSN.

Analytical Summary

• Current Perspective: Positive on Nokia Siemens Networks’ (NSN) managed services deal with the U.S. carrier Embarq, because the seven-year outsourcing contract represents a major North American breakthrough for the vendor in the wireline carrier market, providing significant recurring revenue for the near-to-mid term. In addition, with the acquisition of some of the operator’s network assets, it now has a new platform from which to launch additional managed services offerings in the region.

• Vendor Importance: High to NSN, because while its services organization in North America has participated in some innovative deployments in the last year or two, none has been as large nor as services-centric as the new agreement with Embarq, for which it will operate its voice networks. Out of 100 contract wins publicly announced by NSN in 2006 and 2007 that featured professional or managed services as part of the solution, only four were with carriers in the U.S. and Canada. And even outside of North America, where NSN has won many managed services deals, few have involved full outsourcing of existing operations staff and the acquisition of other network resources. The fact that the deal does not involve the sale of any NSN infrastructure or even management of significant amounts of installed NSN gear highlights the importance of the Services division within NSN going forward, regionally in North America and globally.

• Market Impact: High on the managed services segment of the telecom infrastructure services market, because NSN’s network outsourcing deal with Embarq is the first of its kind in North America. While other telco managed services have been adopted by operator customers in the region, these have been limited to hosted application services (e.g., content and messaging) and managed business support systems (e.g., billing and CRM). Until now, full-scale network operations outsourcing has been limited to the EMEA, Asia-Pacific, and Latin America regions. In addition, full outsourcing has been prevalent far more in mobile networks than in wireline networks. Following this contract, NSN (and its rivals in North America) may find carriers in the region more open to using outsourcing and out-tasking for network operations-related functions, given the success of the model elsewhere and provided this high-profile example is also successful.

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SPECIAL MARKET REVIEW
Telecom Infrastructure Services Contracts in 2007

As part of its ongoing coverage of the telecom infrastructure services (TIS) market, Current Analysis tracks public announcements of relevant new contract wins in a monthly roundup report. Each “Monthly Roundup of Infrastructure Services Contracts” report provides for each deal a contract description and market impact rating, while offering analysis and commentary on higher-impact and more notable contracts and short-term trends, along with recommendations for vendors and their customers.

From this database of contract information, segment trends can be established by looking at aggregated information by customer type (fixed-line carriers, mobile operators, etc.), by service type (managed, professional, technical services), by world region, by vendor and by year. Insights from this data inform the analysis published throughout our TIS syndicated service, but key market trends can be identified further by looking at the aggregated contract information.

Current Analysis is pleased to offer a special report, TIS Market Segment Review: Telecom Infrastructure Services Contracts in 2007. This in-depth, analytical recap of announced services contracts in 2007 provides detailed statistical counts and splits of announced services contracts by market segment, and includes trending comparisons between 2006 and 2007. The 113-page report features more than 40 pages of detailed tables and charts with supplementary analysis.

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