TelcoDR could use $1B war chest to buy Ericsson cloud assets

One company’s trash is another’s treasure. A move by Ericsson to dump certain cloud products and service agreements following a strategic review has prompted interest from TelcoDR, a telecom cloud consultancy with a hefty amount of private equity backing. 

On Wednesday morning, Ericsson warned the market it expects to record a $76 million charge in its fourth-quarter 2022 financial results that’s related to efforts to overhaul its Cloud Software and Services business. Specifically, the vendor said it has “decided to exit certain subscale agreements and product offerings,” but didn’t elaborate.  

Ericsson announced plans to restructure and add a new Cloud Software and Services unit in May 2022. It closed a deal to purchase cloud communications company Vonage in July for $6.2 billion in an effort to expand the unit and improve profitability. In the third quarter, it began reporting results for the division, which proved a drag on overall earnings that quarter, with revenue down 5% year on year on an adjusted basis. 

The vendor’s move this week wasn’t necessarily a surprise, given Ericsson said during its Capital Markets Day in December it planned to limit subscale software development within the unit and shift its focus from making market-share gains to achieving profitability. But the decision to ditch some of its assets attracted attention from TelcoDR, which was first reported by Mobile World Live.

CEO Danielle Royston told Silverlinings by email, “I'd love to look at the whole set of products or contracts they've deemed subscale...I would be happy to do an asset sale or divestiture and would be interested in taking on some of their people as well (to service the product and deliver projects to the customers)." She stressed her interest is sincere.

Ericsson could not immediately be reached to comment on whether it would consider a sale. 

As to why she would be willing to scoop up Ericsson’s products and agreements, Royston said she believes “the industry needs to refactor the software for the public cloud.” She continued, “I don't believe the traditional vendors are building the software to be public-cloud-native. The only way to get the cost savings, innovation and agility benefits that the public cloud provides is by building software with public cloud components.” 

It is unclear how much TelcoDR might be willing to pay – Royston noted she does not know what the assets are “so it isn’t easy to place a price on the assets without more information” – but TelcoDR has plenty of cash to burn. 

Back in October 2021, the company announced the formation of a $1 billion Telco Transformation Fund aimed at accelerating cloud adoption among telecommunications companies. At the same time, it revealed its subsidiary Skyvera would acquire assets from software company ZephyrTel for an undisclosed sum. 

TelcoDR also threw $100 million behind cloud startup Totogi, but that was in March 2021.  

Royston has not disclosed her funding source for the $1 billion fund.  

According to the TelcoDR website, it is looking to acquire enterprise software and companies, with a focus on serving operators. “We consider carve-outs and divestitures, as well as businesses in trouble and on the decline,” the site states, adding it can “acquire businesses in almost any location.”

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