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Nokia’s acquisition of Comptel will help it to fulfil its aim to build a standalone software business

John Abraham Principal Analyst, Research

"The Comptel acquisition provides Nokia with access to a dynamic and growing vendor of specific BSS and OSS solutions, albeit at a premium price."

Nokia announced on 9 February 2017 its agreement to acquire Comptel for EUR347 million (USD370 million) in cash. The deal is expected to close later this year. The price represents a premium of 28.8%, compared with the closing price of Comptel shares on the previous day, and a multiple of approximately 3.5 times Comptel's annual revenue (Comptel's 2016–2017 final quarter revenue is yet to be published at the time of writing).

The Comptel acquisition provides Nokia with access to a dynamic and growing vendor of specific BSS and OSS solutions (albeit at a premium price), and will support one of Nokia's key strategies to build a standalone software business, as outlined at its recent Capital Markets Day briefing in November 2016. Analysys Mason believes that the acquisition is a good buy for Nokia, and the companies' common Nordic culture will facilitate an easier integration.

Comptel has over 800 employees and is organised into Service Orchestration and Intelligent Data business units, offering six products in total. It serves 300 communications service provider (CSP) customers in 90 countries, supporting over 2 billion subscribers worldwide. Comptel's revenue has risen by a CAGR of 8.7% between 2013 and 2015.

The Comptel acquisition adds to Nokia's OSS capabilities

From a fulfilment perspective, Comptel has spent the last 3 years building an industry-leading portfolio for CSPs dealing with the complexities of fulfilling services over both traditional networks and over a hybrid virtualised/legacy architecture. The company was one of the first to set out a clear solution for service orchestration, with many CSPs across Europe, the Middle East and Africa (EMEA) and Asia–Pacific (APAC) buying Comptel's FlowOne and FlowOne-V solution sets, helping to drive the company's high revenue growth.

Nokia does not necessarily have a Comptel-shaped hole in its OSS portfolio, but this acquisition will form the basis of a much more complete vision: Nokia's expertise down in the network will be complimented by Comptel's customer-facing digital service lifecycle management skills up in the OSS. Combining and integrating these functions has the potential to form a real industry powerhouse for CSPs that want turnkey solutions for running network function virtualisation (NFV) in their networks and for implementing a digital service lifecycle management strategy. Both companies have an involvement in analytics, but there is little overlap because Nokia's analytics have been focused on network analytics, while Comptel has a more business-based analytics approach.

Comptel's vision of digital service lifecycle management and service orchestration, along with an evolved digital service catalogue and dynamic, real-time inventory, has helped to create a central thought leadership platform for the company over the last couple of years. Certainly, the company's outspoken attitude to best practice in the fulfilment process will have been an attractive factor for Nokia.

Nokia is also growing its BSS expertise

The Comptel acquisition also adds to Nokia's growing BSS expertise. After divesting its BSS portfolio to Redknee in 2012, Nokia re-entered this space with the acquisition of Alcatel-Lucent for USD16.6 billion in April 2015. To date, Nokia has made significant strides in consolidating and integrating the Alcatel-Lucent solutions, although there continue to be some gaps in its BSS portfolio.

The Comptel acquisition adds Data Refinery to Nokia's portfolio – a robust mediation system that is used by many CSPs as the data source, even for other downstream applications. Comptel has positioned itself in recent years as a leading vendor of mediation solutions and is currently ranked fourth in Analysys Mason's mediation systems market share.1 The acquisition also includes three other key products: the Fastermind analytics application, which focuses on customer engagement; Monetizer, which provides support for OTT and third-party services monetisation; and FWD, which enables CSPs to sell time-based Internet access. While Nokia has its own analytics solutions, it is primarily focused on OSS use cases, and therefore a customer touchpoint-focused analytics application will add to Nokia's arsenal. The Comptel acquisition also offers Nokia access to new customers. Comptel's customer base of 300 CSPs includes operators across all tiers, predominantly in EMEA and APAC regions. However, Nokia is expected to leverage its North American customer base to upsell the Comptel portfolio.

Overall, the Comptel acquisition represents a strong opportunity for Nokia to advance its telecoms software ambitions. Nokia continues to have some gaps in its portfolio compared with OSS and BSS industry leaders, and we expect the company to continue pursuing inorganic growth.

1 For more information, please see Analysys Mason’s Revenue management systems: worldwide market shares 2015.