Neustar Announces Intention to Separate into Two Independent Publicly Traded Companies

Last week Neustar, Inc. (NYSE:NSR) announced that it will separate into two independent and publicly traded companies. One company will consist of the majority of Neustar’s Information Services, while the other will focus on providing Order Management & Numbering Services, including NPAC (Number Portability Administration Center). 

Lisa Hook, currently President and Chief Executive Officer of Neustar, will serve as President and Chief Executive Officer of the Information Services company. Paul Lalljie, currently Senior Vice President and Chief Financial Officer of Neustar, will serve as President and Chief Executive Officer of the Order Management & Numbering Services company.

The Information Services company will capitalize upon client demand for Marketing, Security and related Data Services arising from the hundreds of millions of households and individuals, and the billions of devices that are constantly changing and interacting. This company will provide:

• Marketing Services, including Customer Intelligence, Activation and Measurement & Attribution.
• Security Services, including DNS Services, DDoS Protection and Domain Name Registries.
• Data Services, including Caller ID, User Authentication and Rights Management and IoT.

According to the company’s press release, the revenues associated with these services increased to $470 million in 2015, with a compounded annual growth rate of 25% over the past four years. This company is expected to be re-branded, allowing it to establish an independent identity and reputation. 

The Order Management & Numbering Services company will be a leader in service fulfillment solutions helping communications service providers transform the customer experience by providing next generation services to wireline, wireless and cable communications providers, as well as to social media and messaging platforms. It will build upon its industry leadership in Order & Inventory Management and complex real-time Numbering Services as the communications industry migrates to cloud-based networks and virtualized service architectures. This company will provide:

• Local Number Portability Administration (LNPA), Number Administration and Ancillary Numbering Services, providing critical real-time numbering and routing information to over 2,000 communications service providers to ensure successful delivery of voice calls and text messages and efficient management of telephone number resources.
• Order & Inventory Management solutions that enable communications service providers to exchange Ordering & Numbering information with other providers to support the provisioning of subscribers, services, networks and devices.

The revenues associated with these services increased to $580 million in 2015, with a compounded annual growth rate of 8% over the past four years. NPAC fixed fee revenue will continue to generate approximately $496 million annually through the duration of the contract. This company is expected to retain the Neustar name and brand identity.

Any potential separation, which will be subject to final approval by the Neustar Board of Directors, is likely to take approximately 12 months to complete. Completion of the transaction is subject to a number of customary conditions, including effectiveness of the Form 10 to be filed with the SEC. Additionally, as the company evaluates the preferred transaction structure, it continues to assess what regulatory and other approvals, if any, may be required to complete the transaction.

insideARM Perspective

Neustar has been a provider of data in the highly competitive field of providers to the ARM industry that also includes TransUnion, LexisNexis, Experian, Microbilt, Infutor, IDI, Thomson Reuters, and other niche players.

Notably, Neustar’s exclusive 15-year Federal Communications Commission contract (worth more than $460 million in 2014) to provide mobile phone  number portability data (NPAC) has been of critical importance as TCPA rules (and lawsuits) have evolved in the last few years. It was announced last year that the contract would be transferred to Swedish company Ericsson. The transfer has been held up in court.  It’s interesting that this part of the business will be splitting out from the Information Services unit. 

So it seems that the new (still to be named) Information Services company will represent yet another competitor for data services in the already tight ARM market.