Amdocs Ltd (DOX) 2002 Q4 法說會逐字稿

Good day everyone, and welcome to the Amdocs fourth quarter fiscal 2002 earnings announcement conference call. Today's call is being recorded. At this time, I will turn the call over to Mr. Tom O'Brien. Please go ahead, sir.

Thank you, operator. I'm Tom O'Brien, treasurer and director of investor relations of Amdocs.

Before we begin, I would like to point out this call may contain forward-looking statements as defined under the Securities Act of 1933 as amended, including statements about Amdoc's growth and business results in future quarters. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be obtained or any deviations will not be material. Such statements involve risk and uncertainties that may cause future results to differ materially from those anticipated. These risks include but are not limited to the effects of general economic conditions, Amdocs ability to grow in the mobile wireline and IP business segments, adverse effects of market competition, rapid technological shifts that may render the company's products and services obsolete, potential loss of a major customer, and risks of operating associated businesses in the international market.

These and other risks are discussed at greater length in the company's filings with the Securities and Exchange Commission including in our annual report on form 20-F filed December 27, 2001, and our form 6-K filed August 15, 2002.

Participating in the call are Dov Baharav, president and chief executive officer of Amdocs Management Limited, Eli Gelman, executive vice president, and Ron Moskovitz, chief financial officer. Following Dov Baharav's comments, we'll open the call to Q and A. With that said, let me turn the call over to Dov Baharav.

Thank you, Tom. Good afternoon, ladies and gentlemen.

During today's call, I would like to recap the quarter, provide some comment on current market conditions and review our quarterly (Indiscernible). I will then discuss the actions we took to bring expenses in line with revenues, as well as the corporate organization that we believe will help us better serve our customers. Ron Moskovitz we'll take -- we'll then give some financial (Indiscernible) and provide our outlook for the first quarter of fiscal 2003.

First, our results this quarter are in line with guidance. Revenue was $355.5 million, a decrease of 14.4 % over the last year. Pro forma EPS were 19 cents per share. We generated free cash flow of $82 million, and increased our cash balances to $1,048 million. We were able to accomplish this in our first quarter with our new management team in place by careful focus and execution throughout our organization.

Clearly, the market was not strong during the quarter, if anything. We witnessed additional market deterioration with customer hesitant to close deals. At this time, we don't see any improvement in the market in the near term. That being said, we were able to close five new deals during the quarter, in line with our expectations, but below where we would ultimately like to be.

The competitiveness of our offering, including Amdocs Mobile, Enabler, and Clarify CRM Product was proven again this quarter with key wins in direct head-to-head against our main competitor. We want an important project to replace existing voice and data billing system with CONEX and [Indiscernible] the largest wireless carrier in Romania, where we're replacing two of our competitors.

Amdocs Enabler will will provide CONEX with a single billing platform, reducing total cost of ownership by replacing the separate voice and data billing system currently installed. Our ability to support carrier grade operations for both voice and next generation services was decisive in this bill. We also want a prepaid [ Indiscernible ] convergence project of AxelCom in Indonesia, where Amdocs will provide a single building and CRM platform for all GSM, GPRS, and next-generation mobile services. AxelCom recognizes our unique ability to support both prepaid and post paid billing on one unified platform, as well as the ability to provide integrated CRM MB.

We want a large deal with cable and wireless regional operation. Amdocs Billing Platform will provide cable and wireless regional with the comprehensive and highly scalable solution for its billing and payment processes to fully integrate cable and wireless regional mobile operation and services on to a single billing platform. In addition to this three, we will also chosen to implement Amdocs Clarify CRM at a major mobile carrier in Asia Pacific. And we have a major expansion of our activities as an existing mobile customer.

On operational form, we achieved a major milestone with the completion of the conversion of Nextel's customer base, moving 10 million subscribers to Amdocs system. We replaced multiple databases and legacy billing systems, enhancing operational efficiency and significantly improving customer response time, loyalty and retention. This implementation are part of Nextel's and Nextel partner nine years outsourcing agreements with Amdocs. We also closed an extension to the year 2007 of our outsourcing agreement with Census, formally Pacific Access, the Delta-owned directory publisher in Australia.

On the product side, significant activity included the on-schedule release of version 11 of Amdocs Clarify CRM, offering new advanced browser-base application, simplified legacy system integration and enhanced business process management.

Now, let me take a few moments to discuss some of our key internal initiatives. During the quarter, we implemented a major cost reduction program. This included our previously announced head count reduction as well as [Indiscernible] of facilities. This actions resulted in a $10 million of saving during the fourth quarter, and will generate approximately $30 million in quarterly savings on an ongoing basis. We remain very focused on profitability and being cash flow positive.

We also move quickly to adjust the structure of Amdocs by organizing the company around an offering group and a delivery group. The main focus of the offering group is on expanding market leadership, leveraging Amdocs product [Indiscernible]. The offering groups key objective is going to understand the changing needs of the market and changes in the industry and to quickly adjust our product offering to address this need, allowing customers to achieve a shorter time to market. This is in addition to the product leadership we already enjoy with m=Mobile Enabler and Clarify.

Our objective is to ensure that the Amdocs name continues to be synonymous with the best product offering in the world. As for the delivery group, it leverage all existing geographic base, customer service groups and focuses on enhancing the companies unparalleled track record of service delivery by being closer to the customer and their business processes. In line with this goal, we established a new customer facing the vision to be responsible for developing the growing Asia pacific market. We also established a new outsourcing division and we are particularly encouraged by what we are already seeing. We believe there is a possibility of one or more large outsourcing deals coming to fruition in the next few quarters, and we have been able to accelerate our progress for the same cycle in some of our discussion on other potential outsourcing deals for this year.

Finally, let me outline management's main goal for fiscal 2003 and beyond. During fiscal 2003, management believes that it can generate new businesses by expanding into new geographies. Establishing our new Asia Pacific headquarters in Hong Kong is an example of this. We can also generate more businesses by focusing on sales of high-interest products like [Indiscernible] management and by offering additional services to our customers and prospects.

Looking toward the future, we believe that the telecommunication market will resume growth, in particular in the expansion of new data services. And we remain firmly committed to this market. We continue to make major investment in R&D to evolve our product offering to address the future needs of this market. We believe that as market turns positive, this will allow us to take greater market share. We're also looking to expand into adjacent market within the communications space.

Let me now turn the call over to Ron Moskovitz, our CFO, for the financial review, and then I'll come back with concluding remarks.

Thank you, Dov.

For the fourth quarter, revenue was down 14.4% to $355.5 million. Our pro forma EPS was 19 cents per diluted share, a decrease of 45.7% over last year. Free cash flow, defined as cash flow from our operations less capital expenditures and payments on capital leases, was $82 million in the quarter. At the end of the quarter, we have the cash balance of $1,048 million.

Our DSO at the end of the quarter stood at 80 days, which is below the midrange of a target range of 75 to 95 days. Although we have no clear indication at this time, it's possible that DSO will move better toward the midpoint of our range. At the end of Q4, the fed revenue stood at $149.6 million, which represent an increase of approximately $15 million from the end of Q3.

During the fourth quarter, we saw small decrease in backlog. Our 12 months backlog, which includes letters of intent, contracts, and the committed revenue from outsourcing, ongoing support and maintenance decreased from $1,165 million at the end of the third quarter, to $1,075 million at the end of the fourth quarter. This is a smaller decrease than we have recently experienced. At this point, we cannot be sure whether the backlog at the end of the first quarter will be higher or lower than the current balance. The level of backlog over the next few quarters will be quite dependent on our closing of one or more outsourcing deals, as mentioned by Dov, which are currently being negotiated.

We ended the fourth quarter with approximately 8,350 IT professionals. During the quarter, we executed a repurchase of our convertible notes. We spent approximately $49 million to purchase notes with face value of approximately $55 million. This generated the growth gain of approximately $6 million.

To recap the results for the full fiscal year, revenues grew by 5.2% to 1 billion point 61 million dollars. Excluding acquisition related charges and other items, net income for fiscal 2002 decreased 11.4% to $249 million. Diluted earnings per share decreased 9.7% to $1.12.

Our guidance for the first quarter of fiscal 2003 is for revenue of $333 million to $338 million and pro forma EPS of 18 to 20 cents. At this point, we don't have clear indication for Q2 and beyond and we cannot predict whether there will be more deterioration in revenues or revenues have roughly bottomed out.

During the first quarter of fiscal 2003, we will adopt a new accounting group, FSB 141 and 142, which no longer require us to amortize goodwill. This will be reflected in our Q1 income statement. Also, the effective tax rate for fiscal 2003 is expected to decrease to 25% from 28% in fiscal 2002.

With that, let me turn it back to Dov.

Thank you, Ron.

We are in tough environment; however, we are in the fortunate position that we have the financial stability needed to invest in strengthening our product, services, offering and market shares during this difficult period. This will provide us with the momentum and positioning needed to effectively harvest opportunities that will be generated when the market recovers. There is a great deal of excitement and energy in the company right now. We are expecting a lot of momentum to generate out of our new operating division. We are executing our operation with tight discipline to ensure continued possibility and stability, and with that, let me now open the call to Q&A.

Thank you. The question and answer portion will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touch-tone telephone. If you're using a speaker phone, make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one for questions and we will pause for just a moment to gather our audience. We'll take our first question from Sterling Auty with JP Morgan. Please go ahead.

Hi guys. Two questions. On the outsource deal that you were talking about, is there any indication you have to build ahead in terms of operation needed to support it, or you build out as that deal comes on line?

Well, a -- the deals that we are negotiating right now have not been finalized, so we don't know yet, but it will actually start generated revenue immediately, and regarding a, um, our investment, we would have to invest up front the money in order to, um, adjust and absorb the activities that -- [ Indiscernible ]

But not necessarily investing a lot ahead of when revenues starts to come in?

It, um, I would think would be gradual. We will start absorbing come existing operation, generating some revenue and the main investment that we will have there will be a modernizing system that will take -- that will be over a year or two.

Okay, and then the last question is there was lots of talk over the last couple of quarters from customers trying to reduce the number of people that are providing ongoing support for the systems on site. Is there any sense to whether we have kind of stabilized it at these levels yet or are customers looking for ways to reduce head count for support?

Most of -- as we indicated, um, we see a continuing deterioration in the communication market. And some of our customer are cutting back Cap Ex and operating expenses, including laying off people, and trying to reduce expenses. I would say that the IT expenses, how -- the last we heard and they -- we do not think too many, um, cuts in the OGA, the ongoing support budget and -- in our activity. The edition in some cases, the reduction in some cases, but overall, I would say that the carriers are quite careful not to, um, cut OGS in ways that it might impair the activity.

Our next question is from Greg Gould with Goldman Sachs. Please go ahead.

Hi, this is Liz Grassman sitting in for Greg. You can guys give us color on the competitive landscape that you're seeing in outsourcing deals. Is it different from what you have traditionally seen and more software oriented sales and can you name some of the competitors you're seeing out there that you may not have seen traditionally?

In the outsourcing area, we operate in the customer billing and in advertising in media area, the yellow pages, the directory, side of the business. So, usually when we are competing for outsourcing deal, our main competition is the in-house alternative. Where a substantial portion of the customer performing all the functions internally and they actually, the decisions they have to make is whether to take it outside or to do it internally. However, there is competition, and we compete with a, convergence and we compete with others and -- and that is used to live in a competitive environment since day one and we believe that that will be the case for the years to come.

Okay, a quick follow-up on that one, with Accenture pushing more and more into the business process outsourcing space, you seem to be more a competitor than a partner with you, or are you guys still going to market together quite aggressively?

There are only -- I would say the environment today in the market is such that they -- in some of the cases we cooperate, in some of the cases we might find ourselves competing. And with the system interrogator like Accenture, we might walk together in one case and in some other case where they might be competing against us in another case, so regarding the outsourcing area, we have not yet competed with Accenture or in -- and we don't rule out at some point in the future we will compete with it.

Okay, great, one quick housekeeping question. What is driving the lower tax rate. Does it start in the December quarter?

This is, um, if you remember in the 2001 with the 30% tax rate, it was reduced to a long-term tax planning to integration of what some of our development to low tech jurisdiction, it was done 28%. And it's keeping going down to 2003 to 25%.

And that's in the December quarter we're seeing that?

We'll see it in December quarter. Yes.

Thank you very much.

Thank you, Elizabeth.

Our next question is from Michael Turtis with Prudential Securities. Please go ahead.

Hi, guys, how are you tonight?

Good.

A couple of questions, first of all on the backlog, you're down to 1.075. You said in the past you thought you had an annuity base of 1 billion. Seems like we're scraping down to that annuity base. Is that still the level where you feel, you know, that's your rock solid win or lose, you're going to have a billion, $250 million a quarter. Are we still there? If so, what are the components of that?

We feel that the one billion that we indicated is the floor and it's still numbers that we can feel comfortable with and the majority of it is recurring revenue from our customers and just a small portion of it, a project going on with the large carriers. And we believe that during the year some of their projects that we're having convert from -- to a production and a move from the status of a project in development to an ongoing support and part of the recurring revenue.

So just to be clear here, this is just one billion is a backlog level that you feel you can hold or is this something where you really have a billion-dollars in true recurring revenues that are all set and in place?

I would say that -- well, let me just a, maybe reiterate what is -- explain regarding the occurring revenue and our backlog, actually. When we say backlog, we indicate that it's comprised of deals, a long-term contract, we have a long time relationship with customers where we have a team on the customers side that we're getting every year a work order, and we have a letter of intent where we started to walk on, and with customers. So, we consider backlog as a high probability revenue for the company, given the relationships that we have the customer, given the contracts.

Now, as we indicated, it's not all covered by a contractual commitment of the customers, that's one thing. Second, even if we have a contractual commitment of the customer, not necessarily a -- the customer might actually continue, um, at the same pace with this contractual commitment, so we consider the backlog is a high probability, um, business that is awarded to us for the coming 12 months. So, as I said, I fell comfortable with the $1 billion that these -- will be met, and we hope that that will be the case. It's not guaranteed. But that is our estimate.

Let me switch over to the costs. It went down from 9,000 professionals down to 8,350. At first I thought you were going to cut more. That sounds like about 650. I thought you were going to cut a thousand, maybe this is a net versus gross cut issue. Also, it looks like your total expenses including direct cost came down about 20, just under 20 million. Are you saying you still have additional cuts to go? Should we expect how much more to come out of the quarterly cost level going into the first quarter?

As Ron indicated, we have cut in the quarter of $18 million, and actually the total cost saving will be 30 million, so 12 million, about additional 12 million will be in the first quarter. So, overall, it will be $30 million cut since we announced it. That's one thing. Regarding the number of employees. We are losing about 1,000 employees, including none professional ITs, that is to say people from overhead, administration and other. Now, some of the employees that we have, um, some of them has been notified and in the process, so, they were on the payroll of September 30 and they -- so the process is not being completed yet.

Um, Dov, the -- you mentioned moving in the adjacent areas, that will be my last question, what kind of adjacent areas make sense?

When we are looking at the telecom industry, the adjacent areas, they might be in their functionality area or in the line of a business, all geography, all services. As you all recall, the strategy is to provide a comprehensive offering in the full dimension. One is all the functionality our customers, to our line of business, in all geographies and all the services. So in their functional area, here we are not providing the OSS, the operating support systems, and looking forward to the future, we, um, see a growing importance of OSS, especially in the new -- when you -- new services, new data services will emerge. Will the network and the business system will come closer in order to enable the services. So OSS might be an area, essentially when we're providing today the older management system that is a, um, partially in the OSS, and expanding it will be a natural move by the company.

Now, um, in line of business, we might look at the other area. We're not serving a cable for example, the area that we might look into, and regarding geography, we mentioned Asia Pacific and we might look at other geographies and regarding services, we are doing today, we would like to have more focus on outsourcing and maybe doing more, um, a services to help our customers.

Thank you very much, guys.

Thank you, Michael.

Our next question is from Thomas Vincent with Solomon Smith Barney. Please go ahead.

Thank you, a couple of questions. On the outsourcing deals that you have diluted to, should we assume that that's from either wireless or wireline, or could there be directory systems outsourcing deals in there?

I would prefer to share with you all the details once we have a design. We have several negotiations, we don't know what will be -- what will be close first. Once we have it we would be eager to share that with you.

Okay, in the past you have talked about outsourcing being roughly 30% of your backlog, is that still the case or did that change in the quarter?

We have indicated of about 15%.

15% of revenues or 15% of back log?

Back log.

Okay, what was the outsourcing revenues and directory assistance business, respectively in the quarter, as% of revenues?

The directory systems accounted for 11% this quarter, and the outsourcing repossesses about around 10%.

Sorry, how much?

Around 10% --

Okay.

-- of the revenue for the quarter.

Okay. Um, you can give us an update on the certain business where you're at on that?

Yes, actually we move forward as we indicated this quarter, the quarter with December, ending December. We will have some installation in production, and the next quarter in March, we will have additional installation, so I will say the coming, um, five months, March 31, would be an important a period, and we hope to see a lot of installation. All of the operation is moving, um, according to the plans and all activities, on budget, I would say, and on SPEC and on time. We have a lot of folks.

I would say it's a major undertaking to converge a company like Bell Canada with wireline operation with 30 million subscribers, a wireless operation of 4 million subscribers, a [Indiscernible] with [Indiscernible] and Simpatico and all of that to put them on a convergence system. It's an unprecedented, and it's a bumpy road. It's not easy, and that's the reason why people are approaching Amdocs to do jobs like that. It takes a lot of the effort but we feel we're on the right way and we will -- and we will have it on time and on SPEC and on budget

Okay, last two questions, um, you talked about in the past having a target operating margin of around 20%. Can you give us an update on when you expect to get there, um, and then maybe talk about use of cash.

Regarding the margins, we have a given guidance for the first quarter only. Given that, given the fact things are not clearing up, so I would say that dependency between the level of revenue and the margins that we can achieve. So, as we indicated, overall a we -- we set as the target to raise the cost margin 15%, it's expected in the first quarter and we would like to -- raise it, that depends on the activity in the market towards the end of the year, but our goal is to move it upwards.

Regarding the cash use. We, as you heard, we have about $1 billion and $48 million in our bank account. The priorities that we would like to use the cash is as follows. First of all, use the money for outsourcing deal. We believe that this is the market, has a need for outsourcing deal. Today, when carriers are trying to reduce customer on it on one end, and being able to be competitive on the other end, a -- by having the ability to do outsourcing, they can achieve both. They can consolidate the system, they can have more efficiency in their organization, they can bring the functionality and reduce costs, so outsourcing I would say is our major, um, it's our major, um, target. Now, the second one is. And here, given the fact that we have plans to improve our position in the market maybe expanding our way, within the telecommunication market, and given the fact that our low, that the evaluation in the market for a many companies is, I would say attractive, we see MNA as the second priority. In the third priority, we might use the cash for maybe buying back convertibles or stocks.

Before going to our next question, I would like to take a moment to inform the audience, in the time of fairness, we would like to ask each participant to limit their questions to two. Two questions per person. Our next question is from Mike Latimore with Raymond James and Associates.

Just in regard to the activity of your current customers, can you provide us more color as to what you're seeing there -- is the biggest influence they're doing less than a year ago, or have there been outright cancellations. More -- give us more color going on with your customers.

Just to give you a color from the current conditions of our customers, other than the fact that, um, we are focusing on the Tier 1 and Tier 2 customers all over the world, this is by and large more stable and better customers. Nevertheless, um, they're going from -- to some Cap Ex action. We see less of it in the IT budget but see that from time to time, um, in terms of the size of the deal, we indicated, um, in last quarter that we do see some reduction in the side of the deal, the average size of deal is getting smaller and tend to, um, maybe find the orders in phases so they will sign the first phase and only to the production of the first phase, then move to the other phases. In terms of cancellation of, um, work orders or things of this nature, we haven't been seeing any, um, of this.

Okay, I guess we mentioned the average deal size. What do you mean by average, sort of new work order and any way to quantify the changes going on there?

It means either a new work order or, um, a new deal, um, so I would not say that the current is much smaller but just that what you would usually get is, um, this order maybe slicing to two, three phases. So the average win is, um, getting smaller. The other thing is that some of our customers are asking for a solution to address the pressing needs and trying to fix what they really need for, um, the near future and then focus on end-to-end replacement.

Our next question is from Elizabeth Jamieson with Lehman Brothers. Please go ahead.

Good evening, my first question is regarding the progress you might see in the market regarding the rule out of data services.

Yes.

Well, what we see in the market, especially in Europe, um, a big focus, a lot of effort, a lot of activity in rolling out new services. However, when -- and actually that was a driver, in order to implement our system, our systems that support the 2 1/2 G mainly, and 3 G as well, what we see there is that right now they -- the commercial success of all these new services is yet I would say not satisfactory, and we hope that it will get better. So far it doesn't represent a big change in the market.

I would just like to add that one of the things we have seen all over the world is that, um, instead of looking for one big killer application, the offer these days are trialing many different services and they expect to maybe get the revenue from new services, um, by actually combining smaller services. Um, on top of that, we see some trials and some offer, a new offering for example, services in Europe, with some again, limited success in terms of the penetration, but I don't think that we have seen the operators giving up on the new services. The same applies to DSL mainly in North America, but other places of the world as.

I would like to add here that it's true, everything that we said right now is true to what we see in the market today. But it -- I would say there is a strong feeling among carriers that the new services, at some point in the coming two, three years will be the main driver for the growth of the industry. Maybe it takes more time, but that will be the main driver of the growth, and we're getting ready to support the industry in this area by investing in R&D, by building our product offering so, once we will see some of the services are taking off and we will be there, and $120 million investment in R&D, we leverage [ Indiscernible ]

Thank you, gentlemen. My second question is for Ron. In terms of the geographical breakdown of revenues.

Hi Elizabeth.

Hi.

A geographical breakdown is the --

for the quarter.

-- for the quarter is 60%, North America 20%, 30% Europe, and about 10% the rest of the world.

Our next question is from Peter Jacobson with Kaufman Brothers. Please go ahead.

Thank you, good evening, everyone

Hello.

You can comment on who the 10% customers were during the quarter?

This is Tom. The 10% customers, um, that are around that number for this quarter would be Nextel, SPC, Bell Canada, VODO FON. Each of those as a group are around the 10% mark, some slightly more.

Okay, and second question, um, I was reading that there were some comments made from Amdocs about pursuing CRM pretty aggressively outside of the telecom industry, um, can you, um, clarify whether those comments were made and if so, what the -- what is the strategy, if any, outside of telecom with CRM.

Our focus is mainly on telecom, and actually a -- we indicated from day one that we will continue to support our Tier 1 customers in the enterprise area. And I would say, growing sells -- sales in the HTM area, and we are considering to maybe continue and expand the sales in the HTM area given the success and the relationship with the Tier 1 customer in this area. Our -- our, I would say policy is to continue to focus on industry, so our main focus is telecom, we are considering expanding it to an additional vertical, the HTM, and we do not have any intention to go ahead and -- over all the verticals in the market.

Okay. Great. Thank you very much.

Thank you.

Our next question is from Larry Berlin with First Analysis. Please go ahead.

Evening, gentlemen, how are you doing today?

Good and yourself?

Good. One quick question, you were coming up against systems integrators in competition, what it is what's the pricing environment like with them? I have been hearing rumors that they're trying to undercut everybody else in other fields. I was curious if it applies to your field also.

Um, I would say that, um, their size are sometimes all competitors, but many times are partners and this environment we live in, we have first grade products and they want to, um, provide services around this product. And we have relationship, um, um, many of them, both on the clarified area front and the billing front. In terms of the -- and we will continue this relationship, um, sometimes compete but many times cooperate. Um, in terms of the pricing and, um, cutting their prices, we always had very competitive pricing, um, when compare -- in comparison to the SIs, and we do not know how to comment about the rumors.

Thank you very much, guys.

Our next question is from from Imran Khan, Fulcrum Global Partners. Please go ahead.

I was wondering if you could talk about your average deal size? Seems like your average deal size went down, is that right?

Well, it's -- yes, the average deal size, um, is lower, given the fact that actually customers, um, are preferred -- customer prefer to actually issue smaller project for RSP. Instead of a, doing something big these days, given the uncertainly in the market, they prefer to solve problems by maybe just relating to the nearest definition of the -- of the issue, and by that actually, just resolving a -- at the point solution, so as a result of it, some of the projects that we're involved there are smaller and it's not necessarily that we are -- it's -- actually it's not the case that we have the same project with the same size for lower prices.

Okay and could you please give color about your cable and wireless deal? Is it a North American deal and also about that existing mobile customer, is that a North American deal or outside North America?

The cable and wireless deal is actually covering the regional mobile operation of cable and wireless. It starts in West Indies and Macao where they have a unique operation with a high revenue and it will continue to other installations of cable and wireless. They would like to bring all of the various installations, which are tens of installations on one platform. So they can leverage the fact that it's one company, cable and wireless, operating in many companies, and bringing a value to customers. Now, the contract is sizable, by far larger than average deal, and might be later on extended to wireline operation, and by that, actually providing a few convergent system for all the wireless and wireline operations.

Okay. And one last question, sorry, I was wondering, your [Indiscernible] business, did you lose any existing customer during the quarter or do you expect to lose in Q1?

We have not lost any existing customers and during the last quarter and there was some announcement about some ISP in England that, where we had installation of -- of the however they select the systems there that has been bought by another company, and they prefer to install the systems organization, and however, that was negligible size customer and the -- other than that, we have not lost any customer, and we don't intend to lose anyone in the next quarter.

Okay, thank you, gentlemen.

Thank you.

For our final question, we will go to Tom Earnst with Thomas Wisel Partners Please go ahead.

Good afternoon, gentlemen. Wondering if you could talk about the wireless sector, what percentage of revenues that made up for the quarter, and also if you could shed a little light on the activity you're seeing out there, it seems that we're seeing a little more activity to do launches, so if you could talk about whether RSPs are up in that space. Thank you.

percentage wise, the wireless presented 65% of the revenue for the quarter. Regarding the activity in the wireless area, I would say that there is a lot of activity regarding the new services where a customer trying to be ready for a new services, however, given the fact that the revenue from new services, um, is lagging and there is still uncertainty to what extent the new services might present a real source of revenue, we do not see substantial activity there. So, the there is activity, there -- from the system replacement, but I wouldn't say that it is -- I would say more intensive than last quarter, and it might be the other way around. And given -- looking forward to next quarter, we don't know that it will be, it will get better.

That concludes the question-and-answer session of today's call. At this time, I would like to turn the conference back over to Mr. O'Brien for additional or closing remarks.

Thank you, operator. On behalf of Amdocs, we would like to say thank you very much for attending our conference call. Good evening.

This concludes today's discussion. Thank you for your participation.