Synchronica to enter US via Nokia deal

Synchronica, which provides communication systems for mobile operators, is to enter the US market through a reverse takeover of Nokia’s rival operator-branded messaging business.

The software allows mobile operators to bundle e-mail, instant messaging and social networking features into the devices they sell to customers, including services such as MSN Hotmail, Yahoo Mail, Google’s Gmail and their equivalent chat functions.

Operators are increasingly looking to provide customers with their own messaging services to compete with “over the top” products such as BlackBerry Messenger, Apple’s forthcoming iMessenger and third-party downloads such as Whatsapp, which are eating into text-message and even voice revenues.

Operator-level messaging systems from the likes of Synchronica can provide additional features such as “push” messaging, better battery life for always-on services and integrated billing.

The $25m (£16m) deal will give Synchronica access to Nokia’s 6m active end users across 10 live deployments, including AT&T, T-Mobile and Sprint.

Synchronica’s shares were suspended from trading on AIM pending approval of the deal and a placing to fund it. The company has raised $15m gross, with $4m paid in cash on closing and the remainder in deferred payments, dependent on the sales performance of the acquired assets. The full payment will be made by the end of 2015.

Nokia has been shedding non-core businesses as it prepares for the release of its first smartphones based on Microsoft’s Windows software. It recently outsourced the development and support of Symbian, which used to be its principal operating system, to Accenture, allowing Nokia to shed 2,800 employees. A further 250 Nokia employees and contractors will move across to Synchronica as part of the deal.

Nokia acquired its operator-branded messaging business in 2008, shortly after the launch of the Ovi suite of services, which is in the process of being rebranded.

Synchronica almost quadrupled its revenues in the first quarter of 2011 to $1.9m compared to the same period the previous year, and swung to a pre-tax profit of $0.8m from losses of $2.3m.

“We are very excited to add this dramatic market share in North America to our strong market share in emerging economies,” said Carsten Brinkschulte, Synchronica’s chief executive. The company, which is based in Tunbridge Wells, Kent, has around 80 carrier contracts in regions such as Latin America but the monthly payments per user from operators – which can range between 10 cents and $1 – are higher in developed markets, such as the US.

More than 80 per cent of the revenues from the acquired business are paid on a recurring basis rather than a single upfront licence, compared with 23 per cent for Synchronica’s existing business.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from and redistribute by email or post to the web.