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News
Issue #2003 - 11 (March 2003)
(Updated Mar. 31, 2003)

APPLICATION SOLUTIONS & APPLICATION DEVELOPMENT

SR Telecom Inc. To Acquire Netro Corp In A US$112 Million Deal To Expand Product Portfolio

Based in San Jose, Calif., Netro manufactures point to multipoint fixed broadband wireless systems for telecommunications service providers. Under the terms of the deal, a United States-based wholly- owned subsidiary of SR Telecom will merge into Netro.

SR Telecom's president and CEO Pierre St-Arnaud says that the merger was motivated by his company's desire to include fixed wireless access products in its lineup. Netro technology will now allow the Canadian company to deliver range, carrier class last mile broadband fixed wireless access solutions that are rapidly deployable, reliable and cost effective, he said.

Of particular interest to SR Telecom were Netro's Angel and AirStar products. Angel is a next generation 3.5 GHz wireless access solution. SR Telecom describes it as the first commercially deployed carrier-class non-line of sight system based on OFDM technology.

Angel provides small business and residential users with top quality voice and broadband packet data services on a single platform, said St-Arnaud. It also provides optimal coverage and capacity, as well as a significantly reduced operating and capital cost. The AirStar product is a high capacity fixed broadband access solution, aimed at the SMB space. It's designed to solve the last-mile bottleneck for large business applications, Arnaud said.

"Both the Angel and the AirStar products have an excellent track record for performance and stability," he said.

Forrester Research director of global telecom services Browlee Thomas says the move to expand SR Telecom's product offering by introducing this technology is a good move.

"It makes a lot of sense. SR Telecom has a lot of contracts around the world to install things. So if they're buying this it's because they consider this good cusp technology to be able to sell in Africa, to sell in Asia," she said. "It's where you want to see companies like SR Telecom go."

Thomas said, however, that it is too early to tell whether the new products will make SR Telecom a winner in its market space. The market is so fragmented right now that it's hard to predict who will survive and who will go by the way side, she said.

"It's so fragmented that there are no winners out there," Thomas said. "There were a number, about four or five, national (multichannel multipoint distribution service) MMDS licenses in Canada, for example. Look (Communications) is the only one that survived and even they went through a bankruptcy." 
SR Telecom CFO David Adams said the company also looks to realize a number of financial benefits from the acquisition. Following the transaction, Netro shareholders will own approximately 43 per cent of SR Telecom's common shares on a fully diluted basis. This should significantly strengthen the telco's balance sheet.

"At closing we expect the combined company will have a consolidated cash balance of approximately $75 million," he said. "After taking into account the anticipated restructuring costs, transaction expenses, assumed liabilities we anticipate that SR Telecom will gain incremental cash balances of over $20 million."

The market for fixed wireless solutions is expected to grow by leaps and bounds. Thomas brings up research by United Kingdom-based Ovum research that predicts that in the next five years there will be a 16-fold increase in broadband fixed wireless access. She thinks the numbers are a bit optimistic, but the increase should still be a sizeable one simply because of the high cost the alternatives. 
"I am a telco, maybe Sasktel or maybe I am a telco in Africa, or in Australia. How am I going to put in a new system? I want to give access, I want to get money," Thomas said. "The days are gone where people are going to continue to lay cable. It's just too expensive."

The return on investment is also a motivator for telcos to seek out fixed wireless access solutions, she said. Thomas points out that the ROI term for a second generation PCS mobile wireless network is about 15 years.

"We're not talking 3rd generation here," she said, "we're talking second generation. So if for 3rd generation there's high demand because it's really sexy, maybe the return on investment will be 12 years."

All those factors point to this acquisition being a smart move on SR Telecom's part, Thomas said. 
SR Telecom has a large international customer base. It is present in 110 countries worldwide. The international community and especially developing economies and remote areas are precisely the markets this technology should be targeting, Thomas said. 

Source: business.ca

MobileInfo Comments and Advisory:  Pretty good merger in these difficult times, where too many telecom companies are trying to muscle each other out.

Note: This news release may contain forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of Securities Exchange act of 1934 in USA. Similar provisions exist in other countries. There is no assurance that the stipulated plans of vendors will be implemented. MobileInfo does not warrant the authenticity of the information. Readers should take appropriate caution in developing plans utilizing these products, services and technology architectures.  All trademarks used in this summary are the property of their respective owners.


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