Subex Suffers Loss

Revenue assurance expert Subex Ltd. suffered badly from a "tough" business climate, especially in Europe, during its fiscal first quarter ending June 30, reporting a net loss and a sharp dip in revenues.

The company reported sales of INR 819.75 million (US$14.8 million), down 24 percent from a year ago, and a net loss (after tax) of INR 50.9 million ($0.92 million). In the corresponding quarter a year ago, the company reported a net profit (after tax) of INR 132.1 million ($2.4 million).

In its earnings press release the company noted that its financial results had been impacted by a "change in revenue recognition" practices that would "get evened out during the year," but that message did not appease investors: Subex's share price dipped by 6.6 percent to INR 13.54 on the Bombay Stock Exchange (BSE) in Friday trading.

So can Subex, which recently restructured its debts, recover? (See .)

Well, it's still undoubtedly one of the leading players in the revenue assurance/fraud management space and that's a sector niche that has great potential for growth, not least because network operators are facing ever greater 'revenue leakage' issues as they migrate to IP-based networks. (See .)

Estimates vary about the value of losses incurred by telecom operators every year but it runs into the tens of billions of dollars: the recent Heavy Reading Service Provider IT Insider report, Bigger Than Disney: Telecom Fraud Tops $40 Billion a Year values the problem at about 2 percent of the worldwide telecom services revenue total. (See .)

And there's no doubt that some network operators recognize the problem and are investing in revenue assurance capabilities, with Subex picking up new and repeat deals in recent months. (See , , and .)

But, to date, many service providers have been reluctant to invest in fraud management systems and despite the growing challenges, there's no guarantee that they will target more capex towards revenue assurance capabilities in the immediate future.

And even if they do, Subex faces plenty of competition for any capex dollars from the likes of Connectiva Systems (if it can be revived), cVidya Networks Inc., Equinox Information Systems, Hewlett-Packard Co., MACH, Neural Technologies, Teoco Corp. and WeDo Technologies. (See , , and .)

Ray Le Maistre, International Managing Editor, Light Reading