Ericsson will acquire Red Bee Media, the media services company that was previously spun out of the BBC to provide outsourced playout, publication, access and creative services. It makes Ericsson a major player in the broadcast media services business, with the United Kingdom as a global media hub. This follows a number of strategic acquisitions by Ericsson in the television and video space in recent years.

Red Bee Media was spun out of the BBC in 2005, when the former BBC Broadcast division was acquired by a consortium led by Macquarie Bank for £166 million. The company provides a range of media services, including media asset management, channel playout and online publication, programme information, subtitling and promotions, for broadcasters including the BBC and Channel Four.

With 1,500 staff, the majority of them in the United Kingdom, including a large creative services division, Red Bee Media also has multilingual subtitling operations in France, Germany, Spain and Australia.

Carrying substantial debts and with the prospect of having to renegotiate its contracts with the BBC, the acquisition will be a relief to Red Bee Media and perhaps its clients.

Financial terms have not been disclosed. Subject to regulatory approval and other closing conditions, Red Bee Media will be incorporated into the Global Services business unit of Ericsson.

The main contracts with the BBC ran until the end of 2015 but the corporation had extended them for a further 18 months to ensure that there is no disruption to services and to review the business models before entering into a competitive tender to award new contracts.

The acquisition places Ericsson in a strong position to use its experience in service management of digital networks to engage with the BBC in the provision of outsourced operations.

Ericsson is growing its capabilities in the broadcast services market. In 2007 Ericsson acquired the broadcast services division of Technicolor, which provides playout facilities for commercial television network ITV. That deal closed for €19 million with a potential earn out of up to €9 million.

The enlarged operation will put Ericsson at the heart of the delivery of services for the major terrestrial broadcasters in the United Kingdom, but the Swedish company has wider ambitions.

As part of a global technology and services company with over 110,000 employees worldwide, there are likely to be economies of scale and greater opportunities for expansion.

“Ericsson is making a step change to our business, cementing our commitment to TV and broadcast services and continuing a journey we started in 2007,” said Magnus Mandersson, the head of their Global Services business unit.

Speaking to informitv, Thorsten Sauer, the head of broadcast services at Ericsson, said the acquisition would broaden its service portfolio and “provided a strong sign of commitment” to the sector. He spoke of the industrial logic behind the move and said there was a good opportunity to “leverage the skill set we have acquired”.

He was notably positive about the creative services capabilities and the insight into communicating with consumers that they involve. He also noted that Ericsson could bring a broad range of expertise to customers like the BBC, including network management and research and development capabilities.

Ericsson is the leading provider of manages services for telecom operator networks. In recent years it has extended its service management experience into other industries such as utilities, transportation and more recently broadcasting.

The investment in television follows a number of strategic acquisitions, notably buying Tandberg Television for $1.4 billion in 2007 to become a leading in video compression technology.

More recently, Ericsson announced an agreement to acquire the Microsoft Mediaroom business, which will make it the market leader in IPTV systems, with customers including AT&T.

Ericsson says new services are expanding and re-defining the way consumers experience entertainment, placing new economic and creativity demands on broadcasters, telecommunications and other media companies worldwide. It says the confluence of communications, broadband and media technologies and the use of data and mobile networks to generate and deliver such experiences are creating new opportunities in the ecosystem.