Embarq’s New Era Begins as Nokia Siemens Takes Command

While Embarq retains ownership of the real estate in which its NOCs are located, it has formed leasing agreements with NSN and sold some of its technology assets to them so that NSN has control over the operation to the point they are free to begin taking on new customers.

For Embarq, the bold decision to outsource — bold in that it was first among its peers in North America — primarily is a cost-saving effort. While bound by the contract not to discuss the level of savings, Hansen said it was significant. He also said the company would be looking to cut costs either way, but it was better to do so in a way that resulted in people keeping their jobs with a global company that offered growth opportunities and one that could afford to invest in the latest network management technology to do a better job of maintaining Embarq’s network.

“Had I kept [the organization] it would have been an area where I would be focused on cost-cutting,” Hansen said. “This way, we are reducing costs, but our employees are being re-badged and going to a great company with plans to grow. It puts us in a great position to be more efficient and move forward on getting our network into the IP era. It also allows us to do the things we need to do in terms of innovation and better customer service.”

Embarq looked at five other companies vying for this lucrative managed services contract — the size of which was not disclosed either — but Marcus at Current Analysis said similar deals in length and scope elsewhere have been valued at several hundred million dollars. Hansen said most other companies would have shut down Embarq’s centers and downsized its people.

“So this made great sense for us, great sense for Nokia Siemens and we think we took on the best partner with the best financial deal available to Embarq,” Hansen said.

Not only will the eyes of the industry be watching this partnership with interest, Embarq will be watching NSN as well. The carrier has kept a director and a small team to manage the relationship. “That is critical to the success of this relationship. This isn’t the type of thing you just kick over the wall and say, ‘Here you go.’ It’s a part of our business that has to be managed,” Hansen said.

The voice network Embarq is escorting over the wall represents 73 percent of the company’s $5.8 billion in revenue. That revenue is generated from a rapidly decreasing 6.4 million access lines. Losing 7 percent annually in access lines also prompted new thinking about the business, Hansen said. “The voice side of our network is definitely not growing. [So] we are becoming a data company. This is really about letting us be the company we need to transform into,” he said.

Curtis Price, program vice president of the Infrastructure Services group at IDC, said the managed services market is the fastest-growing segment of the telecom services market, indicating it grew 26 percent from 2006 to 2007 and is now worth $4.8 billion. North America represents only 22 percent of that worldwide managed services market.