Ericsson and 3's deal only a precursor

December 7, 2005

Ericsson and 3 UK announced a seven-year managed services deal through which Ericsson will manage 3's 3G mobile network and IT infrastructure. This deal is the largest in Ericsson's history and includes the transfer of 1,000 employees from 3 to Ericsson UK. Specifics as to the exact dollar value of the deal were not provided by the companies involved, though Pyramid Research estimates that the contract value is in excess of $2.5bn.

Since Pyramid Research began analyzing the managed services and outsourcing market four years ago, their analysts have predicted that larger-scale, more ambitious deals such as this would become the norm. Pyramid Research's Elizabeth Bramson-Boudreau explains, "Operators in an increasingly competitive industry are struggling to manage their network costs and quickly launch new, revenue-generating services and technology solutions. Through outsourcing, carriers are able to focus on increasing the bottom line."

By partnering with their vendor suppliers, operators are able to reduce total cost of ownership (TCO) by as much as 20%, largely through a reduction in network OPEX, while relying on vendors like Ericsson, Lucent, Motorola, and others to manage their network operations and performance. This kind of strategic outsourcing frees up the operator to focus its remaining resources on product development, customer acquisition and retention, and other initiatives that will drive revenue growth.