The involvement of ex-Rakuten Mobile CEO and Open RAN proponent Tareq Amin adds some spice to any proposed deal
Saudi Aramco’s deep-pocketed digital unit Aramco Digital is reportedly in talks to make a circa $1 billion investment in Open RAN poster-child Mavenir. If it goes ahead, the deal likely to be signed off before the end of the year, according to an exclusive by Reuters. The report also said such a deal would value the US vendor at around $3 billion.
If there deal were to go ahead, it would place another Open RAN champion, Tareq Amin, back at the heart of decision-making about the future shape of Open RAN. Amin was the high-profile co-CEO of Rakuten Mobile which trailblazed open RAN, then Rakuten Symphony too but exited in August last year to spend more time with his family. He subsequently reappeared as CEO of Aramco Digital later the same year.
AI strategy
While there was plenty of speculation around what that unit may subsequently do in mobile, Amin downplayed notions suggesting the unit would focus instead on industrial use cases and private 5G. In the meantime Aramco Digital has been sorting out its AI strategy to become a managed AI supplier to the whole Middle East.
In September, Aramco Digital and Groq announced their partnership to establish the world’s largest inferencing data center in the Kingdom of Saudi Arabia. The facility will process billions of tokens per day by the end of 2024 and be able to onboard hundreds of thousands of developers in the region and then hundreds of billions of tokens per day with millions of developers by 2025.
At the time Amin said the initiative not only aims to create the largest facility of its kind but also ensures seamless access to advanced AI computing power for everyone, offered through it digital marketplace, nawat, in a flexible ‘as-a-Service’ model.
An uphill battle
The timing of the deal is interesting given Dell’Oro reckons the RAN market will drop 21% between 2021 and 2029. Mavenir is one of the largest proponents of Open RAN which is an attempt to crack a market that has long been dominated by three vendors – Ericsson, Huawei and Nokia. Operators have typically had a preferred supplier agreement with one or sometimes two of them.
This has proved an uphill battle, but Mavenir has a lot of traction in core network with products like its IMS core proving reasonably popular. Also, some of the relationships with customers it has in this space, such as with Telefonica opcos in Latin America, could also be attractive to a Digital as-a-Service company like Aramco Digital.
Mavenir’s clock is ticking
More to the point, last month S&P said it did not believe Mavenir can repay the outstanding balance on its $133 million term loan obligation which matures in January. As of 31 July 2024, the company had about $17 million cash on the balance sheet and about $32 million availability on its senior secured revolving credit facility. S&P forecasts a free operating cash flow deficit of about $30 million over the next six months. “Therefore, absent a maturity extension or capital infusion, we believe the company will likely default on this debt when it comes due,” concluded the ratings agency.
S&P puts this down to the high R&D expenses for Open RAN. Clearly, Mavenir needs a deal by the end of the year and Aramco Digital is well-placed to deliver it. According to Reuters, Mavenir is working with investment bank Evercore in the talks with Aramco Digital.
A deal between Aramco and Mavenir is likely to pass a US national security review. The Biden administration signed a deal with the Saudis in 2022 to cooperate on the technology to build 5G and 6G networks in Saudi Arabia.