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The compelling reasons behind CommScope’s ARRIS-Ruckus acquisition

Etching a landmark acquisition in the communications industry, CommScope declared the completion of buying ARRIS International plc in the first week of April 2019. The deal, which saw CommScope buy the publicly traded ARRIS and its Ruckus Networks subsidiary for $7.4 billion, enables the company to add a wide range of communications hardware, primarily for cable network operators, to its physical layer infrastructure portfolio. The result is a total addressable market worth more than $60 billion.

The intention behind the acquisition is simple yet profound! Combined with ARRIS, CommScope wants to drive profitable growth in new markets and shape the future of wired and wireless communications. With this transaction, CommScope is better positioned to benefit from long-term industry growth trends, including network convergence, fiber, and mobility everywhere, 5G, Internet of Things and rapidly changing network and technology architectures.

VoicenData Bureau bumped into a CommScope spokesperson to unravel few details on the impact of the acquisition.

It is clear that this acquisition is capable of bringing together two companies — established and respected leaders in their respective markets — with a unique set of complementary assets and capabilities that are expected to enable end-to-end communications infrastructure and connectivity solutions, something that neither company could achieve on its own. This article further lists a few salient outcomes that are expected out of the acquisition:

  1. Creating new technologies that could revolutionize communications

Primarily, CommScope views the combination with ARRIS and Ruckus as an accelerator to help shape communications connectivity and networks of the future. The spokesperson was quoted saying, “This means we have a lot more ways to strengthen our service to Ruckus partners and customers in India and around the world. That’s important because the next few years promise to be the most challenging, and ultimately rewarding, in networking history. As a combined company, we can bring deep expertise in every wireless, fixed broadband, and hybrid technology they’re exploring – and we’re leading the creation of many of them (e.g., CBRS + Private LTE and 10G broadband). With our new vast, global capabilities, we’re focused on delivering a customer experience that’s unmatched.”

  1. Near-term financial benefits + boost in patent applications

In addition to creating long-term growth opportunities, the acquisition also is structured to deliver near-term financial benefits to CommScope, including an expected 30-plus percent accretion to adjusted earnings per share in the first full year post-close and annual cost synergies of at least $150 million within three years.

CommScope also is expected to generate nearly $1 billion of cash flow from operations in the first complete year post-close and expects to use the free cash flow to aggressively pay down debt. Through the completion of the transaction, CommScope has expanded its product offerings and R&D capabilities, with the combined company having approximately 15,000 patents and patent applications globally and approximately $800 million in average annualized R&D spending.

  1. Evolution of CommScope Group

The acquisition is complete now, and the process of integration is now underway. CommScope’s first priorities are its partners/customers and employees – ensuring a smooth transition is their primary agenda, which will happen as the company explores new ways to enhance the experience and capabilities it provides. “As we combine our people and technologies, we look forward to creating a stronger combined roadmap that will allow us to grow over time,” disclosed the CommScope spokesperson.

  1. Paving the readiness pathway for 5G

CommScope sees opportunities around 5G and convergence, with ARRIS acquisition. “Our industry has been seeking an industrial-strength solution that spans the enterprise, the home, and everywhere in between. Now, we can bring that combined set of solutions and end-to-end capability for even the most challenging, harsh environments, where the quality of the connection is crucial, including:

  • Mass deployment of broadband – whether it is to millions and millions of homes or enterprises;
  • Smart city applications – where we are trying to provide coverage across a broad neighborhood, public venue, sporting stadium or educational environment;
  • And, as the wireless industry moves to 5G, CommScope is one of the best-positioned providers with its technology, global reach, and innovative solutions,” concluded the spokesperson.

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