Nokia, once the world’s biggest handset maker, really wants everyone to know that it’s a software company now. And today it made a big acquisition to that end: it is buying Comptel, a company that specialises in building software-based data communications solutions for mobile carriers. Nokia’s offer is to pay €3.04 in cash, valuing Comptel at €347 million ($370 million).
Comptel’s software is today in use by more than 300 operators, covering 1.2 customers in 90 countries, and it processes 20% of the world’s mobile data usage daily, with an emphasis on developing markets (it has no customers in North America, for example).
The key thing here is the software element: Nokia’s legacy (and the legacy of other carrier suppliers) has been in “kit” or equipment — the expensive and more difficult-to-upgrade hardware of the telco enterprise world.
But Marc Andreessen’s theory that “software will eat the world” doesn’t just apply to software companies becoming more powerful in the tech landscape: it speaks to a change in how things are built and made more efficient, moving solutions into cloud-based architectures, and that is what is also playing out here: Nokia may also still be a big player in carrier equipment (and some newer things like VR cameras) but that business is in decline, so Nokia is trying to show that it’s changing with the times.
“Nokia is committed to building its software business and is backing its commitment with strategic investments. The timing of the Comptel purchase is important as our customers are changing the way they build and operate their networks. They are turning to software to provide more intelligence, automate more of their operations, and realize the efficiency gains that virtualization promises. We want to help them by offering one of the industry’s broadest and most advanced portfolios. Comptel helps us do that,” said Bhaskar Gorti, president of Nokia’s Applications & Analytics business group, in a statement.
Still, it’s perhaps one more nail in the coffin for those who might have wondered if Nokia had a direct plan to return to handsets up its sleeve.
The company arguably created and then led the market for mobile phones for years, until the shift to smartphones undid it. Nokia was just not innovating quickly enough to catch the trend in quite the way that Apple, Android maker Google, and eventually dozens of OEMs making Android handsets did, with their focus on platforms that tapped into the latest innovations for smaller computing, the growth of mobile networks, and crucially a new way of delivering services, by way of apps that bypassed the carriers that were the bread and butter of Nokia’s business, and therefore problematic for Nokia to disrupt.
After its initial partnership with and eventual sale of its handset business to Microsoft, many wondered which way Nokia would turn, and while it’s licensing its brand to HMD to make “Nokia” phones, this serves as a guide to what Nokia itself is doing.
Specifically, Nokia will be combining Comptel with its own carrier solutions business, and will be aiming it at those carriers looking to “automate as much of their network and business operations as possible.” That includes customer services, self-optimization, management and orchestration.
“Comptel would help with this objective by bringing catalogue-driven fulfilment and digital service lifecycle management, complex event processing, applications for customer engagement and service monetization; and emerging technologies for context-aware on-device commerce and IoT pattern detection,” Nokia said.
Comptel and Nokia are also neighbors of sorts — both are
based in Finland (Helsinki and its suburb Espoo, respectively), so in
one regard this is part of regional consolidation that may have been
long on the cards. Comptel, founded in 1986 and traded on Nasdaq. But
it’s also consolidation of another kind: the combined company will be
able to use the scale to compete better against the likes of Cisco,
Amdocs and Ericsson.
“Together with Nokia we would create an agile and
innovative player which can challenge current market leaders
head-to-head. Throughout the past five years we have been working hard
to sharpen our thought leadership and competitiveness by rebuilding the
brand, product portfolio and values driven culture. I am 100% confident
that we are now capable, ready and passionate to take the next step in
scaling and expanding our business beyond the ordinary with a new set of
resources that Nokia would provide us,” said Juhani Hintikka, President
and CEO of Comptel, in a statement.
Comptel is giving Nokia several things: new software
technology; a network of people to sell services to the market, and a
base of carrier that are already using Comptel services and can be
upsold to a wider range of products. “Comptel would bolster Nokia’s
software portfolio by adding critical solutions for catalogue-driven
service orchestration and fulfillment, intelligent data processing,
customer engagement, and agile service monetization,” Nokia notes.
Although Nokia has been in the news lately
for yet more patent fights with Apple, it’s good to see it continuing
to forge ahead as a tech business, and not just a licensing entity
intent on living off its legacy. The company has made many tweaks to its
business since ceding its role in mobile handsets, including buying Alcatel Lucent for nearly $17 billion; selling its mapping unit Here for €2.5 billion to a car consortium (and now others); moving into IoT and digital health (and buying Withings to do it) and still making new moves in hardware, specifically a VR camera.
Nokia said that its “share price offer represents a premium of 28.8
percent versus to the closing price of the shares on Nasdaq Helsinki
Ltd. (“Nasdaq Helsinki”) on February 8, 2017.”The deal has yet to close, but Nokia also noted that several major shareholders have already agreed to sell their shares: Mandatum Life Insurance Company Limited, Elisa Corporation, Kaleva Mutual Insurance Company, Varma Mutual Pension Insurance Company and Ilmarinen Mutual Pension Insurance Company as well as the members of the Comptel Board of Directors and the President and CEO of Comptel — altogether 48.3 percent of the shares and votes in Comptel.
As with many deals of this kind, it’s now a question of whether other shareholders believe they can hold out to get more money from Nokia or another buyer, if they believe Comptel is worth it, and they are willing to wait to see if it is.
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