Competition and a Shift to Outsourced Solutions Drive OSS Spending From 2003; OSS Spending Worldwide Will Reach $49.6 Billion by 2005.

Business Editors/High-Tech Writers

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--April 4, 2002

Worldwide service provider Operational Support Systems (OSS) spending will grow from $33.6 billion in 2002 to $49.6 billion by 2005, a CAGR of 14%, according to RHK's new OSS Market Forecast report. RHK reached these conclusions after a comprehensive global study that included interviews of 50 service providers and 200 software vendors. The overall picture is one in which spending on commercial software, system integration, in-house development, and element management systems will accelerate after 2002, as service providers look to improve operational efficiencies through automation.

"Demand for data services and increased competition within the global telecom market will re-stimulate OSS spending after 2002," remarked Patrick Kelly, senior analyst with RHK's OSS Global program. "Despite reduced carrier spending in 2001, we expect investment in OSS to resume growth in late 2002. Deregulation will begin to impact the market, creating new mega-carriers that will force competitors to reduce costs and time-to-market for new services. OSS will be essential as service providers strive to differentiate their services."

RHK's global forecast model includes financial analysis of the world's largest wireline and wireless service providers, including historical and future spending patterns of the top 100 operators segmented by geographical regions -- North America, EMEA, Asia-Pacific and Central and Latin America. The forecast also segments the OSS market by service provider type, OSS functions, including billing and customer care, service assurance, and service fulfillment.

"The allocation of in-house development to outsourced software and services will vary depending on the operator's tenure in the market and regional economics," said Kelly. "We believe service providers will allocate more OSS budget dollars to commercial suppliers that can demonstrate paybacks within the budget cycles."

Key Findings include:

-- Commercial suppliers will capture 40% of all OSS expenditures in 2002. This
differs from the early 1990s when internal spending accounted for approximately
90 percent of the overall OSS budget.

-- OSS spending differs regionally. In North America independent software
vendors' share of OSS budgets was 49 % versus 26 % for Europe in 2001.

-- The majority of OSS investments in the short term will be in wireless GPRS
and support of IP in wireless networks. OSS spending on 3G networks is not
expected to be significant until late 2003.

RHK defines Operational Support Systems (OSS) as the software necessary to automate the process of accepting, fulfilling, assuring, and billing for services.

This report is part of RHK's OSS: Global program that examines the fundamental drivers that influence service provider spending on OSS to increase profits, improve service delivery, and customer satisfaction. The program addresses the effect of the highly fragmented market shift toward consolidation and the opportunities and challenges for equipment vendors, software vendors, and system integrators worldwide. For more information about this program and other RHK services, please contact Mike Mahan in the United States at +1 650.737.9600; Takashi Kimura in Japan at +81.3492.1341; or George Stojsavljevic in Europe and Rest-of-Asia-Pacific at +44.1462.485440.

RHK Inc. is the leading industry market research and consulting firm specializing in the analysis of advanced technologies for the global public telecommunications network. The company provides subscription services and consulting to technology vendors, service providers, and the investment community worldwide. RHK's areas of expertise include: Broadband Access, Operational Support Systems, Optical Components, Optical Networks, Packet Services, Switching & Routing, Telecom Economics, and Telecom Semiconductors. For more information, visit the company's Web site at www.rhk.com.