• Digital support systems (DSS) vendor CSG Systems has reported strong Q4 and full year results
• The trading uptick comes as NEC is rumoured to be considering a takeover offer for CSG 
• CEO Brian Shepherd addressed the M&A rumours during the vendor’s earnings conference call
• But at least one industry analyst is sceptical that an NEC/CSG deal makes sense

Billing and customer care systems vendor CSG Systems, which is currently the subject of merger and acquisition (M&A) speculation, just made itself more valuable by reporting strong fourth-quarter and full year financial results for 2024. 

The Denver, Colorado-based company is believed to be a potential takeover target for Japanese tech giant NEC, which already owns Netcracker Technologies, one of the leading providers in the digital enablement systems (billing, charging, mediation, customer experience management) sector. 

If NEC fancies acquiring CSG in order to merge it with Netcracker, the potential purchase price might have just gone up, after CSG reported a 6.5% year-on-year increase in fourth-quarter revenues to almost $317m (its highest ever quarterly sales figure), while its operating profit leaped by 71% to $42.3m. 

For the full year, CSG reported revenues of almost $1.2bn, up by 2.4%, and an operating profit of $131.3m, up 6%. It noted also that 52% of its total revenues come from the cable/satellite operator sector, 18% from the telecom operator sector, and 30% from customers in other industry verticals. Its biggest customers are US cable operators Charter Communications and Comcast, which generated 20% and 19%, respectively, of CSG’s total revenues in 2024. 

The company expects 2025 full year revenues to edge up to between $1.21bn and $1.25bn.

During the company’s earnings call on Wednesday, CSG’s CEO Brian Shepherd called out a number of new customer deals and contract expansions that were sealed during the fourth quarter of 2024. These included wins with European enterprise service provider Gamma Communications, which is deploying the vendor’s cloud-based configure, price, quote (CPQ) system, multi-year managed services deal extensions with MTN South Africa and Sausi Arabia’s Mobily, a contract extension with Singapore’s M1 and, most important of all, a six-year contract renewal with Comcast. “CSG will continue to provide broad mission-critical support for Comcast triple-play broadband subscribers and other areas of Comcast’s business,” noted Shepherd. “This giant deal was in addition to a meaningful new standalone billing deal at Comcast in another part of their business that was also won in early Q3.” 

The CEO also called out deals struck during 2024 for its cloud-native digital enablement platform Ascendon with Telenor Denmark, Lyse in Norway and Claro in Brazil. “These wins highlight an important inflection point that we’re seeing in the telecom market as more leading wireless operators are willing to run their core billing and monetisation engines in the cloud, a trend that bodes very well for our revenue growth with our AWS cloud-native Ascendon platform,” added Shepherd. 

The fourth-quarter and full year momentum, plus the news that CSG plans to increase its cash dividend payments in 2025, sent the company’s share price up by 2.8% to $61.66 in trading on the Nasdaq exchange on Wednesday, giving the vendor a market valuation of almost $1.8bn. 

If NEC is to make a play for CSG, it will need to pitch a higher offer than that. Commenting on the M&A speculation, Shepherd noted: “We don’t comment specifically [on market rumours], but we believe that with the results we’re putting out, people are going to take notice and you’re going to get talked about more. So we think being more relevant is a good thing, not a bad thing… From an industry logic, if you kind of step back… is there industrial strategic logic of what could be unlocked by putting assets like [NEC and CSG] together? Of course, there’s large strategic industrial logic. What we’re focused on is just performing and delivering results like we put up in Q4 and it will take care of itself.”

He continued: “If something moved from rumour mill to actually a compelling offer that looked like it could be actionable, of course, our board would do the right thing by shareholders with the right thorough process. So industry consolidation in telecom – has it happened consistently over two decades? Yes. Is it likely to continue to happen? Yes. What do we do? Just perform quarter in, quarter out.” 

If NEC did make a move on CSG it would be aiming to combine Netcracker – one of the top-three players in the digital enablement systems sector, traditionally called the BSS (business support systems) sector – with CSG, one of the top-10 companies in the sector, which is led by Amdocs.  

According to Appledore Research (in this assessment of CSG), the digital enablement sector was worth $31.7bn in 2024 and is set to grow gradually to be worth $35.3bn by 2028. (That market value includes professional services and product sales, with a split of about 65% and 35% respectively). 

But does an NEC takeover make sense? Appledore Research principal analyst John Abraham is sceptical. 

“NEC’s existing subsidiary, Netcracker, is already a leading vendor with a strong BSS practice, established through its 2012 acquisition of Convergys. According to our estimates, BSS represents over 50% of Netcracker’s revenue. The company has successfully secured and implemented major contracts globally, sometimes leveraging support from NEC’s professional services division,” noted Abraham.

“CSG is experiencing strong momentum with significant growth. While the company maintains dominant BSS market share among North American cable operators, its telecom presence is considerably smaller. Beyond telecom, CSG has achieved some success with its payments and customer experience solutions,” continued the analyst. 

“In our view, Netcracker’s significant portfolio overlap with CSG limits potential synergies from a merger. Although CSG’s strong presence among major US cable operators is attractive, this factor alone would likely not justify the acquisition cost. Also Netcracker has shown limited interest in M&A activity – the company has far fewer acquisitions when compared to other major digital enablement vendors, such as Amdocs or Oracle. While NEC could maintain CSG as a separate brand – similar to its approach with Netcracker – the acquisition price [would] make this strategy potentially unattractive. Given the unclear strategic benefits, we question the value proposition of NEC’s rumoured CSG acquisition. CSG can better serve mid-tier to large opportunities as an independent company, providing CSPs an effective alternative to large Tier-1 BSS vendors,” concluded Abraham. 

- Ray Le Maistre, Editorial Director, TelecomTV