When I heard CSG Systems International, Inc. was buying interconnect and retail billing company Intec, my ancient memory cells twigged. CSG, well known as a provider of customer and billing management solutions to satellite broadcasting and cable operators in North America, is not that well known outside its key market. Intec, on the other hand, has a diversified range of customers, including more than 60 of the world’s top 100 carriers among its 400 customers worldwide.
It was reported that Intec had been struggling recently, and it was also common knowledge that it had been looking out for a buyer for some time. The question was, who might be interested? Intec has been cutting costs this year and is almost debt free, but it hasn’t been losing a lot of money. In the six months to the end of March 2010, the company posted a net operating loss of £4.1 million (US$6.4 million) from revenues of £70 million (US$110 million). However, its share price had dipped from 120 pence in January to a low of 56.5 pence just before the sale announcement.
The CSG offer of 72 pence per share seemed a good deal that the Board was quick to recommend to investors but, as a consequence of the announcement, prices instantly shot to 75 pence on the open market. That’s puzzling enough on its own but what is even perplexing is the CSG decision to buy, especially when considering its last foray into the same space was less than stellar.
For those of you that can remember the heady days of billing, Kenan Systems was acquired by Lucent Technologies in 1999 for the incredible sum of US$1.48 billion, mainly in shares. Two years later it sold the Kenan assets to CSG for US$260 million in an all cash deal. As a combined entity, CSG announced it would be able to offer proven customer care and billing solutions for all sectors of the communications marketplace, including cable television, direct broadcast satellite (DBS), advanced Internet Protocol (IP) services, next generation mobile, and fixed wireline telephony and to a much broader international footprint.
Exactly four years later CSG announced the sale of its Global Software and Services Division, basically the Kenan assets it had acquired from Lucent, to Comverse, Inc. The aggregate sales price was about US$249 million in cash. An announcement by CSG at the time of the sale stated that CSG would intensify its focus on its core competencies in the cable and DBS markets. It seems global domination was not its forte.
In view of the history it comes as quite a surprise that CSG has made the Intec acquisition ‘to expand its product portfolio and increase its international reach.’ CSG says it plans to offer jobs to all of Intec’s 1,600 staff, “with only limited exceptions relating to executive management.”
Let’s hope it’s a case of ‘second time lucky.’ I’m guessing that Intec’s workforce and CSG investors share the same sentiment.