Ericsson announced plans for SEK 6.1 billion in one-time charges in Q4 to restructure its BSS business, according Telecompaper. The company said its new Revenue Manager product had proven unsuccessful and had to be written off. It plans to restructure the business in order to focus on updating its existing platform, Ericsson Digital BSS. The charges include about SEK 3.1 billion for restructuring, as well as payments for contract losses, customer compensation, writing off intangible assets and provisions for project delays. Ericsson said it expects another SEK 1.5 billion in charges in 2019 for planned headcount reductions and further restructuring at the division. The vast majority of the provision amount will impact cash flow, starting in 2019 and continuing over several years as projects are completed.
Ericsson expects the restructuring to end the losses in the BSS activities in 2019 and set the business on a path to reach its targets for the Segment Digital Services of a low single-digit adjusted operating margin in 2020 and 10-12 percent margin no later than 2022.
No revenue from Revenue Manager
The company’s past BSS strategy included pursuing large transformation projects based on pre-integrated solutions, including development of a next-generation BSS platform, the full-stack Revenue Manager. The strategy has not been successful, and the expected customer demand did not materialise, Ericsson said. To date the full-stack Revenue Manager has not generated any revenues.
Delays in product and feature development also made the full-stack Revenue Manager less competitive. R&D resources in BSS have been focused on full-stack Revenue Manager, causing further delays in product releases of the established platform. In addition, certain complex transformation projects experienced delays and cost overruns, the company said.
To help meet the targets set at its Capital Markets Day in November, Ericsson is launching a revised BSS strategy, including increased investments in the established platform, Ericsson Digital BSS, and refocusing the full-stack Revenue Manager to fulfilling existing customer commitments only. Furthermore, since 2017, Ericsson is applying a selective approach to large transformation projects, focusing on projects based on available products.
Further details of the plans will be presented with its full-year results on 25 January.