Subex, provider of telecom software products, has signed an agreement to sell its activation business to NetCracker, a US-based telecom operation support system provider which is part of the $40 billion NEC Group, for an undisclosed amount.
The activation business posted $15 million (Rs 67 crore) revenue in 2010-11. It came to Subex with its acquisition of Syndesis (of Canada) in 2007 for $165 mn. As part of the agreement, about 100 people in this business would move to NetCracker.
According to Subex chairman Subash Menon, divestment of the activation business is part of the company’s decision to focus on core products to sustain growth and improve margins. Subex’s core products include ROC solutions (revenue assurance, fraud management, partner settlement, data integrity management) and managed services.
“The market is changing and so are the operator’s needs, to remain competitive. The market evolution is towards solutions that allow communications service providers to combine data with insights to trigger customer-centric realtime decisions. Subex is strategically positioned to take advantage of these growth areas through its ROC and managed services portfolio. Hence, we have taken a strategic decision to focus on our core products,” he said.
The company said the renewed focus would enable it to increase revenue by more than 20 per cent annually, with a positive growth in Ebitda (earnings before interest, taxes, depreciation and amortisation).
Subex’s activation business consists of service fulfilment solutions and products such as NetProvisioning, NetOptimiser and Vector. The business was running at a loss until the last financial year, when it managed to break even. The company expects that sans this business, the Ebitda of its product business would be able to go up to 39 per cent as against 33 per cent last year.
After the global economic slowdown, the Bangalore-based company had been under pressure, with the budget cuts by global telecom firms. The company’s financials had been under pressure due to the repayment of debt and foreign currency convertible bonds (FCCBs) due for redemption in March 2012. Menon said the proceeds from this sale would be used to partly repay the debt and the FCCBs.
As on June 30, Subex had FCCB liabilities with a face value of Rs 419 crore redeemable in March 2012.
The company had then said it was pursuing various options such as fund raising through debt or equity and negotiations with the current lenders on the FCCB obligations.