STOCKHOLM (Dow Jones)--Sweden's L.M. Ericsson Telephone Co. (ERIC-B.SK) Monday announced a new managed services contract from telecom operator Zain in Nigeria, and predicted rapid growth in the African market for network outsourcing.

The deal with Zain, which is owned by Kuwait-listed Mobile Telecommunications Company KSC (ZAIN.KW), is Ericsson's first managed services contract in Africa and confirms the business model's growing importance, Lars Linden, Ericsson's president for Sub-Saharan Africa, told Dow Jones Newswires.

Under the five-year contract with Zain, Ericsson will manage the operator's Nigerian GSM/WCDMA network, which covers around 18 million subscribers, he added.

Market watchers have long predicted a rising number of managed service deals, whereby operators outsource the running of their networks in order to cut costs.

In the first quarter of 2009, Ericsson's managed services sales jumped 35% year-on-year to 4.2 billion Swedish kronor ($535 million), or 8% of total group sales. Monday's news comes after the Stockholm-based equipment vendor last Friday announced a network upgrade and managed services contract with 3 Italia, controlled by Hutchinson Whampoa Ltd. (HUWHY).

The contract from Zain indicates that network outsourcing is on the rise also in emerging markets, Lars Linden said.

"An increasing number of operators follows this trend, which confirms that this is a sustainable business model which continues to make inroads into different continents and markets," he added.

Linden said the general telecom market in Sub-Saharan Africa, where Ericsson has doubled its mobile networks market share to around 50% over the past seven years, is growing rapidly. Still, he predicted that sales of managed services on the continent will outgrow other business segments as operators increasingly turn their focus to customer services rather than network maintenance.

Analyst Hakan Wranne at Swedbank described the contract with Zain as "reasonably big" and said it might lead to more African orders for Ericsson, but left unchanged his Reduce rating and SEK65 target price.

At 1313 GMT, shares in Ericsson traded down 0.6% at SEK69.50, outperforming a 1.7% drop in the wider Stockholm market.

Hmm,
Na wa o!
The same ZAIN sacked 300 staffs last month!

Bottom Line:

Other Telecom operators will follow suit if the proposed plan works out.

This is rather sad for the telecom industry,

This is doom for telecom operator employees oh! Zain has started a new monster