Nokia Siemens Networks (NSN), a 50-50 joint venture between Nokia Corp. (NOK - Analyst Report) and Siemens AG , announced that it has entered into an agreement with the billing and charging software service provider Redknee Inc., to divest the company’s Business Support Service (BSS) division.
NSN is offloading its BSS unit for $52.2 million of which $19.6 million will be received at the closing of the deal while the company will get the remaining $32.6 million for certain performances-based cash earn outs. The deal is expected to close in the first half of 2013.
As part of the acquisition, Redknee will get Nokia-Siemens’ intellectual property assets as well as a strong list of over 200 customers spread across 90 countries. Additionally, Redknee will also get NSN’s 1,200 employees, who are mainly based in Germany, India and Poland.
NSN has been going through tough times as sales have declined mainly due to competition from low-cost Chinese manufacturers. The company also lacked severely on the CDMA front, which is the most dominant network used in the lucrative North American market.
To overcome this difficult situation, the company is reducing its operating costs by retrenching employees and selling its non-core business units. NSN plans to lay off 17,000 or 23% of its work force and expects the restructuring to result in an annual cost reduction of approximately $1.35 billion by 2013.
Excluding the BSS unit, the company has trimmed about 13,000 of its work force and has made six divestments this year, which include offloading of its optical unit to Marlin equity partners for an undisclosed amount.
Initially in Aug 2012, NSN put up its BSS unit for sale, which received attention from several potential bidders including Sweden’s Ericsson AB (ERIC - Analyst Report) , Amdocs Ltd. (DOX - Analyst Report) and some private equity firms. However, in Dec 5, 2012, Redknee agreed to acquire the BSS division for $52.2 million.
The deal will not only allow Redknee to get access to tier 1 telecom carriers but will also enhance its portfolio of support service for its customers. NSN on the other hand will be able to concentrate on its core mobile broadband business, which remains the prime focus of the company as carriers around the world continue to amend their network infrastructure.
Both Nokia and Siemens currently carry a Zacks Rank# 3 (Hold).