Telecom equipment maker Ericsson said it had struck a deal to buy Microsoft Corp's Mediaroom IPTV business, which makes software used by phone companies to deliver television over the Internet.
Ericsson said it expected to close the deal for the business, which employs more than 400 people worldwide, during the second half of 2013. It did not disclose a purchase price, though a company official provided a ballpark figure.
"This deal is within range where we previously bought a company called Optimi for $99 million and where we also bought LG Nortel for $234 million,'' said Ove Anebygd, Vice President and Head of TV at Ericsson. ``So this is somewhere in between the two.''
Ericsson said the deal would make the company, already the world's biggest mobile networks maker, the leading provider of IPTV with a 25 percent market share. Microsoft's website said the Mediaroom platform was offered by more than 40 operators.
Internet protocol television (IPTV) uses the same technology that powers the Internet to transmit multimedia content over telecom and cable networks. Ericsson wants to cater to phone companies that are competing with cable, satellite and web-based media providers.
"This acquisition contributes to a leading position for Ericsson with more than 40 customers, serving over 11 million subscriber households,'' said Per Borgklint, Ericsson Senior Vice President and Head of Business Unit Support Solutions.
The Mediaroom platform is the TV technology used by television service providers such as AT&T, Deutsche Telekom, Telefonica and Swisscom, Ericsson said.
"This makes a nice strategic fit, but it is hard to estimate the impact on key figures since they are providing no financial information,'' Alandsbanken analyst Lars Soderfjall said.
With competition from Chinese network providers stiff over the last few years, Ericsson has focused increasingly on services, such as managing networks for operators, and on software, where it has more of a competitive advantage. It is a leading player in solutions that enable operators to charge for online services and as part of its shift from hardware-based products has also built up a presence in IPTV, a position underpinned by acquisitions such as that of video technology firm Tandberg Television in 2007.
"This completes Ericsson's IPTV offer, with ... MediaRoom nicely rounding up the Tandberg TV assets,'' said Alexander Peterc, analyst at Exane BNParibas.
"This makes Ericsson more of a go-to company for triple play solutions for telcos, and likely a stronger competitor to ALU (Alcatel-Lucent).''
Ericsson said the global IPTV market was estimated to reach 76 million subscribers in 2013 with revenues of $32 billion, growing to 105 million subscribers and $45 billion in 2015.
Ericsson said the deal was subject to customary regulatory approvals and that the business would be integrated into its Support Solutions unit.