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January 29, 1998

LCC SIGNS EX-EDS MAN FOR WIRELESS OUTSOURCING DEAL

By CBR Staff Writer

LCC International Inc, which supplies radio frequency engineering and network implementation services and products to the wireless telecommunications industry, is set to carve itself a groundbreaking niche as the first provider of outsourced services to wireless operators and infrastructure providers. To turn its vision into a reality, McLean, Virginia-based LCC has lured ex-Electronic Data Systems Inc’s European chief Dr Geoffry Carroll to take the helm as president and chief executive. Carroll left EDS Europe in June 1996 to become chief executive of Philips Electronics BVs Origin BV (CI No 2,928), and promptly left 5 months later (CI No 3,041). Carroll says he was baffled when LCC approached him about the job, since he has no background in telecommunications, let alone wireless, but having researched the company, he realized that as a supplier to almost all the major telecoms operators in the US and many of the majors worldwide, as well as many of the major infrastructure companies such as LM Ericsson Telefon AB, Motorola Corp and Siemens AG, LCC was ideally placed to begin offering to take over many of the non-core systems and services on behalf of these companies. LCC’s current business falls into two areas: services – including engineering, design of where cell sites should be located, and network deployment; and products – including predictive software to help engineers work out how the cell site will react, and hardware for monitoring calls and the performance of cellular towers. The company has more than 400 radio frequency engineers worldwide, which it claims is the largest independent team of qualified RF engineers in the world, and it believes it has the expertise and the capacity to take on the management of non-core tasks ranging from mowing the grass around the cell site to monitoring tower performance and beyond. To date, to monitor a cellular tower, operators have a fleet of vehicles driving around with a special piece of equipment which takes GPS global positioning by satellite data and readings from each tower, and needs a dedicated team of drivers. LCC has developed a monitoring device which can be fitted in taxi cabs, vans and trucks, to make use of any vehicle which regularly drives around for commercial purposes anyway. Carroll believes the wireless communications industry is where the IT industry was about 12 years ago, with competition opening up at an incredible pace due to deregulation, and companies still doing 100% of the job in-house. He says some major players have just begun outsourcing billing systems, and believes the time is absolutely right for LCC to step in on the network design and deployment side. The company turned over around $145m in 1996, and expects 1997 revenues to be closer to $200m, with 60% currently from the US and 40% from a worldwide business spanning some 60 countries. With the explosion in wireless subscriptions in Europe, estimated at around 35% compound annual growth against 15% in the US, the company can see that balance changing considerably in the next couple of years. Carroll says LCC has money in the bank, and he does not believe a move into outsourcing would be in any way dilutive to earnings. One major benefit the company could deliver to customers is the opportunity to share cell towers, thereby cutting costs significantly. At the moment, each operator will build its own tower, but LCC’s idea is to bid for strategic sites, build the towers and lease space on the towers to several operators, which it says is perfectly feasible technically. LCC says until recently, there were only two competitors in the cellular phone market in the US. Now there are seven, and there are new entrants all the time. The major differentiator for any of the operators now is cost for the customer, and therefore everyone is looking to trim their fat and cut costs. Carroll spent the year between leaving Origin and now advising Daimler-Benz AG and its debis Systemhaus information technology subsidiary on what to do with its 25% stake in Cap Gemini SA, resulting in Daimler selling its stake and buying back the 19.6% stake in debis owned by Cap Gemini (CI No 3,224). He now has the task of selling the value of outsourcing to an as yet untapped wireless telecoms industry, and building LCC into a wireless EDS.

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