It’s my first year at the Mobile World Congress and the experience so far has been extremely valuable; for my initial post I have chosen the area of network optimization as this is an area poised for further consolidation. The macro-drivers remain interesting: strong pressure on margins is forcing mobile network operators to look for ways that extract every bit of performance and value from their radio access networks. The cost of running a wireless network accounts for c.30% of a mobile operator’s cost structure and within this category, 70% to 90% of operating costs are associated with radio access network (RAN). We are talking big sums for the carriers. Over the past two days I have met with key players in the network optimization space:

Actix is one of the dominant players. This UK-based company focuses on performance engineering solutions (network optimization is a subset of their offering). Majority-owned by Summit Partners, Actix had a bumpy year in 2007; yesterday they announced an exciting new Network Status Management solution that will complement their existing network performance products. Optimism was in the air when I talked to the CFO and Strategy Director, especially now that they are launching new products and opportunities and that challenges are being created by the ever-changing wireless environment (3G, Wimax, 4G).

Another important player in the space is Optimi, a US-based company with a special focus on optimization solutions. The company had some internal problems 3-4 years ago but managed to bounce back fervently (at least this is what their competitors said). Interestingly, as a result of an acquisition, Optimi has kept a main office in Malaga, southern Spain. As far as I know, they have never received institutional money.

Schema is the third and probably the most interesting competitor. Headquartered in Israel, the company has raised capital from several local VC funds. Schema and Optimi’s design and optimization solutions follow a similar approach and both claim to be more accurate than Actix’s offering. By utilizing a proprietary algorithm technology, Schema may have an advantage over its competitors. Not entirely sure this is the case, but what I noticed is that most players kept talking about them! They must have done something right.

So, is consolidation on the cards? All three companies aim to improve the way operators plan, implement and manage their network resources, enabling operators to improve customer acquisition and reduce churn. All three operate on a global scale, have similar size of revenues for their network optimization solutions (($20-40m), compete in the same markets (with the exception of Schema which is not very active in the Middle East) and have a similar number of employees. My take on it is that consolidation is possible and who knows, maybe private equity firms will play a role in the process. Could Aircom Solutions also be part of the equation?

Your comments are welcome. In the meantime, I will continue to “enhance my network” at MWC. Have a good one!