Pipeline Q&A: Vallent (cont'd)

Pipeline: How is your business impacted by the mega-wireless mergers?

Well there are two areas of mega-wireless mergers. You have mergers like that of AT&T Wireless – Cingular, which are becoming one entity, where in Europe you have these multi-operator groups that have formed. So, there are two versions of what you can call the mega-wireless companies.

Here in the US , specifically the merger of AWS and Cingular has been beneficial to us. We were fully deployed at AWS, and Cingular was already in the process of evaluating its service management solution. After the merger, they now have us in the AWS portion of their network and we are working closely with Cingular and AWS as part of the integration process. For us, specifically both the creation of AWS Cingular and the mergers that created Verizon have been good, and have let us in every case expand our solution from one of the legacy providers to across the entire network of the combined entity. I don't think we've had a situation where there was a merger and we were the loser.

In the group wide scenarios in Europe , I think in most cases this helps us from a SQM perspective because it allows us to deal more across a group wide level and not have to prove our solution at three different operating companies – so we can evaluate at one and deploy across three. With the Metrica acquisition we are incumbent as the performance manager in nearly every carrier, and that let's us build toward further deployments of our SQM solution.

Pipeline: What kind of work are you doing for US Cellular, and how viable is the Tier 2 wireless market for OSS solutions?

Today with US Cellular we have our performance management system deployed on a nationwide basis supporting both Lucent and Nortel networks. US Cellular is one of our best customers. It is a quality focused company, so we work very well with them. They are now starting the process of looking at SQM solutions.

Most of the 2nd tier wireless carriers have a network wide performance management solution in place, and most of them are either on Watchmark Prospect or Metrica NPR, so most have a solution from Vallent Corp. There are a few of them that are in the process of evaluating service management strategy in both Europe and the US . You see the Tier 1s kicking off the SQM wave, but the Tier 2s are following in the next few years. In the end, as service management systems become integrated they allow the business to operate more efficiently and more customer focused. What I mean by efficient is keeping your customer happy in a more efficient way.

Pipeline: The Yankee Group predicted that the service assurance market in North America would reach $684 million by the end of 2004. Do you think that prediction came true?

The thing is, as you dig into Yankee and OSS Observer predictions, is what do they mean by Service Assurance? They include SQM, SLA management, performance, fault, and some include test and measurement which is a very large market. Some studies also include probe systems as part of performance monitoring. Clearly all of those contributing elements are reaching that $684 million number. So, was that amount spent on service assurance in 2004, I wouldn't doubt it. We're about a $70 million company, and that's just network based performance management which is a small piece of that whole category, so it could be in excess of that $684 million. OSS Observer put out a service assurance report in mid-2004 that breaks down everything out to 2007, and that report will give you the most granularities.

Pipeline: What kind of work are you doing for Orange Madagascar , and what's your sense of further opportunities in the Eastern hemisphere?

For Orange Madagascar we are deploying the Metrica NPR performance management solution network wide. But you can't categorize Asia in general as a homogenous set of operators. You have some operators at the very leading edge of service delivery, such as in Japan and Singapore for example. But you have other operators in the region, like in India and China , where they are focused on building out massive voice networks that can deliver to huge numbers of customers, as you've seen. These networks are at different levels of maturity and have very different customer bases.

Asia is a full range of different maturities and corporate objectives. So, for us there's a range of opportunities as a result. You see operators installing performance management systems for the first time across their networks, like at Orange Madagascar . We have a few deployments of the Metrica NPR system in place and those operators – don't forget about Telstra in Australia too – those operators are strongly evaluating service management solutions and we are working with them there. So our Asian focus includes a segmentation of the customer base based on maturity and focus, and based on that we are either focused on PM systems or SQM systems. We see huge growth opportunities in Asia .

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