News

Lucent Buys Biller Kenan Systems

1/17/1999 7:00 PM Eastern

Lucent Technologies said it will be able to offer a broader
range of convergence solutions due in part to its $1.48 billion acquisition of Cambridge,
Mass.-based Kenan Systems Corp., a privately held subscriber-management-system developer.

The all-stock purchase brings into the fold a 17-year-old
firm with customers including BellSouth International, AT&T Corp., British
Telecommunications plc and GTE Corp.

Over the past year, Kenan has been attempting to elbow its
way into the cable business in the United States. To date, it has signed deals with Le
Groupe Vidéotron Itée in Canada and with cable-modem service @Home Network in the U.S.

Lucent executives said they made the investment in the SMS
realm because of the fast growth of the segment -- 30 percent per year worldwide, they
told analysts during a conference call. Kenan has posted better-than-average growth
compared with other companies, they said, adding that the acquisition should add to
Lucent's per-share earnings in 1999.

The information-systems-management company has reported
annualized revenue of $100 million. The Lucent deal should expand Kenan's domestic
presence further: 40 percent of its revenue is currently earned through dealings outside
of the U.S.

The Lucent name should also give more muscle to
Kenan's efforts to gain domestic telecommunications customers. It is currently a
distant fourth in market share behind CableData Inc., CSG Systems International Inc. and
Convergys Corp. (which just completed a spinoff from its corporate parent, Cincinnati Bell
Inc.).

Cable executives said it's always beneficial to have
back-office choices -- especially if CableData spends a lot of time soliciting business
outside of cable to make up for the shortfall caused by the migration of its biggest
customer, Tele-Communications Inc., to rival CSG.

Further, CSG could be kept busy servicing TCI's needs
and completing the development of the "SummiTrak" billing platform, which TCI
tried to build in-house before abandoning the idea.

Kenan "can't help but be a much bigger
player" with the backing of Lucent, said Herb Lair, a former billing vendor who is
now a consultant.

"There are two or three different players developing
-- Paul Allen, Microsoft [Corp.] -- who will need sophisticated solutions," he said.
Kenan is strong in international business -- an added plus, Lair said.

Kenan specializes in off-the-shelf software that requires
little customization by the end-user, said Kenan Sahin, its founder.

The company's core product,
"Arbor/Broadband," supports standard broadband functionality -- such as
inventory, pay-per-view and multiservice-network activation -- plus a
work-force-management system. It allows users to offer complex product packages and
cross-product discounting on offerings that can be billed by account, service type or
address.

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