Nokia, once the world’s biggest handset maker, really wants the world 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 mobile data communications solutions for carriers. 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). Nokia’s offer is to pay €3.04 in cash, valuing Comptel at €347 million ($370 million).
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 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.
Specifically, Nokia will be combining this 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.
Still, it’s perhaps one more nail in the coffin for those who might have wondered if Nokia had a 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 — it 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. After its many deals and eventual sale to Microsoft, many wondered which way Nokia would turn, and so this serves as a guide to that, too.
Nokia said that the share price offer of Share Offer Price 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.
It notes that it will publish an update on the offer on February 24; and the offer period under the Tender Offer is expected to commence on or about February 27, 2017 and to run for approximately four weeks.
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