Marconi Expands High-Value Services Capability through Acquisition of MSI for US$618 Million (£391 Million)
20 April 2000
Marconi plc ("Marconi") today announces that it has agreed to acquire MSI, a global provider of consultancy and planning services and business and Operational Support Services software used by the wireless telecommunications industry.
The acquisition of MSI is in line with Marconi's strategy to increase its capabilities in high value-adding network services and brings substantial knowledge and experience in the mobile and fixed wireless markets. MSI's capabilities will enhance Marconi's ability to win and execute Plan, Build and Operate contracts particularly in 3G and broadband wireless networks, which are rapidly growing areas of the telecommunications market. MSI's growing strength in Asia will complement Marconi's position in that region, continuing the expansion of the Group's global presence.
MSI has over 100 wireless service provider customers in more than 60 countries, including Sprint PCS, Nextel, AT&T Wireless, Vodafone Airtouch, PrimeCo, Telstra, Connect Austria and SingTel Mobile. MSI has approximately 600 telecoms professionals at 19 offices located world-wide. In the year ended 31 December 1999, MSI had revenue of US$92.9 million (£58.8 million). For the quarter ended 31 March 2000, MSI reported unaudited revenues of US$23.0 million (£14.6 million), representing an increase of 38% over the same period in the prior year.
Operators' networks are becoming increasingly complex as mobile Internet access and other new data services become available to mobile phone users. It is expected that the global market for wireless data services will grow from 3 million users at the end of 1999 to 36 million users by 2003. This rapid market growth, combined with increasingly complex networks, creates a number of challenges for operators in managing their networks and services to meet customers' increasing requirements. MSI's products and services are designed to allow operators to more effectively use their networks to interact with their customers to capitalise on the rapid growth in mobile telephony, increase revenues and maximise customer retention. MSI's addressable market for wireless operators is expected to grow from $160 million in 1998 to approximately $4.5 billion in 2002.
- Its Planet and Maxxer software and RF consultancy practice is a market leading combination in wireless network planning, build-out and performance management.
- Its Ceos mediation software enables wireless equipment from different vendors, both legacy and next generation, to capture real-time usage information for network operators.
- Its Cerve provisioning management and Ceer customer management software enable service providers to more effectively use their networks to interact with customers to reduce churn and increase revenues.
MSI, under the leadership of its current CEO Tom Butler and CFO Derek Meades, will work together with Marconi's Communications, Services and Mobile divisions to ensure that they capture the major synergies from providing complete turnkey solutions to fixed and mobile wireless operators. In addition, the technical expertise within MSI will be shared throughout the Marconi group to assist in the development of new products with increased functionality.
Marconi will pay US$618 million (£391 million) for the MSI shares, comprised of US$310 million (£196 million) in cash and US$308 million (£195 million) in new Marconi shares. In addition, US$104 million (£66 million) of in-the-money options and warrants may be rolled over into new Marconi options. The value of the employee option package may increase by a further US$179 million (£113 million) subject to continuing employment of MSI employee option holders including senior management. The majority of this value will only be realised if certain performance criteria, including synergy targets, are met. The transaction is expected to have a positive impact on cash earnings per share in the first full year after acquisition. The transaction is subject to regulatory approvals and other customary conditions and is expected to be completed in June 2000. The number of Marconi shares to be issued in respect of this transaction will be determined based on the Marconi 5 day average share price immediately prior to completion.
Commenting on the acquisition, George Simpson, Chief Executive of Marconi said:
"The opportunities generated by this combination are very exciting and I am confident the sales synergies we realise will be multiples of MSI`s current revenues. MSI takes Marconi further up the value chain in network services and wireless and equally importantly brings a team of top flight telecom professionals who are dedicated to providing high level software solutions to their clients. I look forward to working with Tom Butler and his team to realise these substantial opportunities."
Tom Butler, Chief Executive of MSI said:
"The global market for wireless services, with particular reference to the enablement of high quality broadband and fixed wireless services is red hot. Joining Marconi will enable MSI to offer our customers the next generation of innovative services and 3G software for a converging environment. We have already established an excellent working relationship with Marconi on various projects. We have several common customers and compatible global operations. This merger will unleash great potential for Marconi and MSI employees alike".
There will be a conference call for analysts at 9.30 am London time on 20 April 2000 with accompanying slides accessible through Marconi`s website (dial-in number +44 20 8240 8248 and quote "Marconi"). To listen to the call after 9:30 am, dial +44 20 8288 4459 (access code 604162)
There will also be an audio webcast of the conference call available at www.marconi.com/msi from 2.00 pm London time.
All figures reported in US$ were translated into Sterling based on an exchange rate of USD/$1.58 as of 19 April 2000.
Notes to editors:
Marconi was advised by ARC Associates, Warburg Dillon Read, Cravath, Swaine and Moore, and Freshfields
MSI was advised by DLJ and Weil, Gottshal and Manges
MSI's private investors include General Atlantic Partners, LLC, a leading global investor in Internet and Internet-enabled information technology businesses.
Audio Webcast Instructions
To receive the audio webcast of the Conference Call (until 20 May 2000):
- Connect to the Web Conferencing service of Genesys Conferencing, and select the blue To Participate box,
- Fill out the form with your e-mail address, and quote:
- Conference Name 106668 and Passcode 106668 and
- state the Date of the Conference Call, i.e. 04/20/2000
- The first time you participate, you will also need to fill out the lower form giving contact details, and finally
- Select Submit Form and you will be given the option of two streaming formats.
About Marconi plc
Marconi plc is a global communications and IT company with 45,000 employees worldwide and sales in over 100 countries. It supplies advanced communications solutions and the key technologies and services for the Internet. Marconi plc is listed on the London Stock Exchange.