Avaya to buy German IP telephony supplier

US telecommunications equipment maker Avaya increased its presence in Europe by acquiring German enterprise communications...

US telecommunications equipment maker Avaya increased its presence in Europe by acquiring German enterprise communications supplier Tenovis for $635m (£357m).

The deal will strengthen Avaya's sales and service presence in Europe, especially in Germany, according to Lynn Newman, an Avaya spokeswoman.

Tenovis will be integrated into Avaya, but no decision has been made on staffing levels or on the branding of Tenovis' products, she said.

Avaya will pay approximately $370m in cash and assume about $265m in debt. It will acquire Tenovis from affiliates of private equity firm Kohlberg Kravis Roberts, according to a company statement.

After the companies are integrated, Avaya expects Tenovis to contribute about $1bn in annual revenue.

Both companies play in the growing market for IP (Internet Protocol) telephony, in which voice calls are converted to data packets and sent over a carrier data network or enterprise Lan.

Tenovis provides enterprise communications systems and services for midsized companies and has about 200 customers throughout Europe, the Middle East and Africa, Newman said.

The company has 5,400 employees in Europe, primarily in Germany. Avaya has approximately 15,000 employees worldwide but only about 1,700 in Europe, she said. After the acquisition, Avaya expects its European revenue to grow from 12% to 30% of its worldwide business.

The acquisition is subject to standard regulatory approvals and closing conditions, and Avaya will not project when the deal will close, Newman said.

Avaya was spun off from Lucent Technologies in 2000. Frankfurt-based Tenovis was founded in 1899 as a telephone system rental business, according to a company statement.

Tenovis offers a wide array of products including IP telephony, call centre and unified messaging systems, as well as managed services for planning, financing, provision and operation of information and communication technology.

Growth prospects for IP telephony are at least as good in Europe as in North America, according to Frank Dzubeck, president of consulting company Communications Network Architects.

Avaya leads the world in call centre technology, which is being transformed by IP technology, he said. A greater presence in Europe will be a boost for Avaya, especially with the potential for IP call centres in Eastern Europe, Dzubeck said.

Avaya in April agreed to buy a large stake in Tata Telecom, based in New Delhi, which gave the company a strong channel in the booming call centre industry in India.

The company especially needs to expand its support organisation to compete overseas, because IP call centres, which can be distributed across multiple locations, tend to require more employee training and support work, he said.

"Avaya's been pretty good with call centers ... but with IP telephony, you need a much more significant presence," Dzubeck said. "The deal they made was extremely beneficial for them in terms of broadening their scope."

Stephen Lawson writes for IDG News Service

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