Ericsson has concluded the review of strategic opportunities for its Media business – Media Solutions and Red Bee Media – which was initiated in conjunction with the announcement of the company’s focused business strategy on March 28, 2017. In the review, Ericsson has evaluated different opportunities for both units, including partnerships, divestments, and a continued in-house development, based on what generates the best long-term value for Ericsson. One Equity Partners,will become the majority owner of Media Solutions and will establish Media Solutions as a leading independent video technology company.
Ericsson has partnered with One Equity Partners, a private equity firm with deep expertise in media and telecom investments, to further develop Media Solutions. Ericsson will retain 49% of the shares in the company. This structure will establish Media Solutions as a leading independent video technology company with strong and committed financial support driving continued investment in innovation and growth. Upon completion of this transaction, Media Solutions will be positioned as a premier independent pure-play video technology vendor, with both hardware and software solutions.
Ericsson and One Equity Partners will form an independent company and will develop the business in line with its new business plan. The performance improvement initiatives initiated in 2017 will continue, and are showing tangible results. Media Solutions employees and contractors, as well as specified assets and liabilities, will transfer to the new company upon closing. Ericsson and OEP said they are committed to a seamless transition for employees, customers, partners and suppliers. The divestment will not result in significant restructuring charges. Closing of the transaction is expected in Q3 2018 and is subject to customary closing conditions, including regulatory approvals.
Red Bee Media
In a separate announcement, Ericsson said the strategic evaluation of Red Bee Media has concluded that the strategic upside from continued development was deemed to be significant. The company said in a statement that the focus will now be on developing and transforming Red Bee Media, to enable its full potential as an independent media services business. Performance improvement and legal separation initiatives implemented in 2017 are set to continue in 2018.
In March 2017 Ericsson presented a focused business strategy and stated that the company will explore strategic opportunities for Red Bee Media, to enable the business to scale and succeed in the evolving media landscape. Ericsson has now concluded the evaluation of strategic opportunities and has decided to remain as the owner and continue to develop Red Bee Media as an independent and focused media services business. Ericsson has evaluated different opportunities, including partnerships, divestments, and a continued in-house development, based on the value they generate for Ericsson.
During 2017, Ericsson has successfully been running a performance improvement program for Red Bee Media, and significant progress has been made, both in operational efficiency and cost savings. This has given increased freedom in choosing the most value creating option for the business.
The performance improvement work has included a legal separation of the broadcast and media services business, tactical and transformational initiatives, clarified positioning and the adoption of the Red Bee Media brand. With the improvements carried out during 2017, and a new business plan with the underlying customer needs as well as market and technology trends, Ericsson sees potential and future upsides to Red Bee Media.
Steve Nylund, CEO, Red Bee Media, says: “Red Bee Media is already today a leading broadcast and media service provider, with a strong customer base among the top tier broadcasters and service providers. Our focus is now on improving and transforming Red Bee Media, in partnership with our customers, to enable our full potential as an independent and focused media services business.”
Full Year 2017 adjusted operating income* for Red Bee Media was SEK -0.3 b. Full year revenues were SEK 2.5 b. Though still negative, the Q4 2017 adjusted operating income for the Red Bee business was significantly improved year on year, driven by cost and efficiency improvements. The Red Bee Media business will continue to be reported in segment Other.
Red Bee Media employs more than 2500 media service and broadcast experts primarily based out of 11 main service hubs around the globe. Every year, the business delivers more than 2.7 million hours of programming in more than 60 languages for nearly 600 TV channels. The Managed OTT service has more than 340 channels and over 20 000 hours of live programming every week.