ADC Acquires Saville for $700m, Forms Software Division.

ADC Telecommunications Inc, the Minneapolis, Minnesota-based telecommunications equipment manufacturer, has agreed to acquire Irish customer care and billing systems software house Saville Systems Plc, in a stock swapping deal worth around $700m. Saville, which has around 1,400 employees and has its US base in Burlington, Massachusetts, will be used by ADC to get itself established in the operational support systems software business. The deal, which will be accounted for as a pooling of interests, is expected to close by the end of October.

Saville, founded in 1982 and listed on Nasdaq since 1995, had been struggling against increasing consolidation in an overcrowded marketplace. In February, one of its partners, Lucent Technologies Inc, acquired Saville's competitor Kenan Systems Corp for around $1.48bn in stock. Additionally, the company has been moving its software base from IBM Corp's AS/400 over to Unix. Last year it acquired Australian telecom software provider BHA Pty Ltd for $15.8m to speed the process up.

Only a few years ago, telecoms billing was a closed market, dominated by computer services companies such as Digital Equipment Corp and IBM Corp, companies who helped build and maintain bespoke systems for monolithic, mostly state-owned monopolies. But the arrival of mobile telephony in the mid-1980s, coupled with deregulation during the 1990s, has transformed the market. Analysts say it is one of the fastest growing sectors of the software industry, expected to grow from $17bn in 1998 to about $26bn by the end of the century. Players include Isreal's Amdocs Ltd, privately-held Intertech Management Group Inc, the UK's Kingston-SCL, LHS Group Inc and Portal Systems Inc. LHS recently acquired Priority Call Management Inc, a provider of telecoms software, for $151m. And now new competition is coming from emerging providers of internet billing software, such as Belle Systems SA, Solect Technology Group and TAI Corp.

Saville has been mentioned as an acquisition target since its share price collapsed after it reported a 21% drop in revenue for its first quarter, down to $30.2m from $38m in the first quarter of 1998. The company made a net loss of $3.2m compared with a profit of $9.2m in the same quarter last year. Besides ADC, the list of potential candidates to acquire the company had included Logica Plc (which acquired fellow Irish billing company Aldiscon Ltd for around $82m in July 1997), and European systems integrator and outsourcing firm the Sema Group.

ADC plans to establish a new Software Systems Division, combining Saville with the two other software firms it has bought in recent years. In 1996, ADC acquired the UK firm Metrica Systems Ltd for its performance management software, and in 1997 it bought Shelton, Connecticut-based NewNet Inc for Signalling System 7 technology, wireless intelligent networking and law enforcement wiretap software.