Ericsson pays US$2.1bn for former rival Marconi

Struggling telecom equipment maker Marconi’s takeover by former rival Ericsson should be good news for its customers and staff in the region, the head of its Middle East operations told IT Weekly last week.

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By  Chris Whyatt Published  November 6, 2005

Struggling telecom equipment maker Marconi’s takeover by former rival Ericsson should be good news for its customers and staff in the region, the head of its Middle East operations told IT Weekly last week. The US$2.1billion deal, announced last month, will see Ericsson buy the bulk of Marconi’s operations, including its overseas services business. A large part of that business is the value-added services business of Marconi Middle East, which has over 400 employees working across the region. Bryan Simms, managing director of Marconi Middle East, said that while Ericsson has some very large customers in the region, such as Etisalat and STC, it has previously lacked local infrastructure and support services, which Marconi can provide. “Ericsson paid a lot of money for us, for a good reason,” he said. “They bought us for our services capabilities. They want to do something in the Middle East, they believe it’s got great room for improvement and potential for development… so how better to do it from a services perspective? The Middle East [business] was a big draw for them.” Ericsson has stressed the importance of Marconi’s services business to its acquisition. “The acquisition of the Marconi businesses has a compelling strategic logic and is a robust financial case,” said Carl-Henric Svanberg, Ericsson’s president and CEO. “As fixed and mobile services converge, our customers will substantially benefit from this powerful combination.” Marconi Middle East has a strong presence in the region with offices in Riyadh and Dubai. Over 320 staff are employed for a major service contract with the Saudi National Guard, worth US$175 million, with another 30 employees working on its Dubai Marina contract. The latter is reportedly worth US$550 million to the company over a ten-year period from 2000, and covers the servicing and implementation of next-generation networks. While Ericsson has said that job cuts are “unavoidable” as a result of the takeover, with up to 1000 jobs at risk in the UK and overseas, Sims said he believed his staff are safe. “For our employees, it means good news,” he said. “I can’t say any more until I know where we all sit within the new structure, but I’m truly not worried.” Because Marconi Middle East is so heavily focused on services, which is the area where Ericsson is trying to develop its competencies, Simms said he believed the business stands up as a very attractive proposition: “It will hold a much stronger position against the competition now,” he insisted. Marconi’s regional customers should also benefit from the extra resources and impetus that Ericsson can provide, Simms said, adding they were happy with the move. “From a customer perspective, they are encouraged,” he claimed. “They feel more secure now, with a bigger organisation above the entities here,” he said, conceding both Dubai Marina and Saudi National Guard were well aware of the decline of Marconi as a business in the past five years.

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