Cisco is upping its bet on femtocells. On Wednesday, the networking company announced its intent to buy Swindon, U.K.-based Ubiquisys for about $310 million in cash and retention-based incentives.
Ubiquisys provides intelligent 3G and LTE small-cell technologies for connectivity across networks. In a posting on Cisco Blogs, Hilton Romanski, vice president and head of Corporate Business Development, said the purchase complements Cisco's recent acquisitions of BroadHop and Intucell.
In January, Cisco spent $475 million to buy Israeli start-up Intucell, which had developed networking technology to boost mobile capacity. A few weeks later, Cisco bought Denver-based BroadHop, which provides next-generation policy control and service management for carrier networks.
Romanski noted that, with carriers increasing capacity to serve the growing population of smartphone and tablet users, "adding small cells is one of the most cost-effective ways to multiply capacity and make better use of scarce spectrum assets." He added that Cisco's mobility portfolio and Wi-Fi expertise, along with Ubiquisys' indoor small cells' expertise and focus on intelligent software for 3G and LTE, will provide "a comprehensive small-cell solution."
Small cells, such as the ones made by Ubiquisys, cover only a short range indoors or outdoors, and are low-powered, wireless access points -- essentially, mini-cell towers. These devices, also known as pico- or femtocells, are commonly used to complement high-speed mobile coverage. Ubiquisys has nearly five dozen carriers and other technology companies as customers, including T-Mobile, Google and Softbank.
Kelly Ahuja, senior vice president and general manager for Cisco Mobility Business Group, said in a statement that Cisco was " 'doubling down' on its small-cell business," and expanding the current end-to-end portfolio to include "integrated, licensed and unlicensed small-cell solutions that are tightly coupled with SON, backhaul, and the mobile packet core." SON are self-organizing networks.
The purchase is expected to boost Cisco's direct control over small-cell products and services, so the company can better control development, offer analytics, and lessen its dependency on carriers.
As 4G/LTE mobile networks increase their coverage, femtocells are expected to become an increasingly important part of the infrastructure, filling in those hard-to-cover spots, using wireless bandwidth more efficiently than regular networks, and helping offload some of the traffic from cell towers to the broadband Internet infrastructure.
In August of last year, Ubiquisys Chief Financial Officer Fraser Park told The Wall Street Journal that, "when people install a femtocell, satisfaction jumps by 94 percent." Because of the revenue loss from dissatisfied customers, not to mention the cost of customer acquisition, high customer satisfaction is a boon for network providers. Park added that Vodafone, AT&T and other carriers expect that, once their macro next-gen networks are essentially finished, the incremental growth beyond that will be driven by small cells.
Ubiquisys, founded in 2005, will become part of the Cisco Service Provider Mobility Group, and the deal is expected to close by the end of the fourth quarter.