Nokia Siemens Networks - the implications

Nokia and Siemens will be merging the Networks Business Group of Nokia and the carrier-related operations of Siemens into a single company to be known as Nokia Siemens Networks. This review spells out the strengths and opportunities of the new company, as Nokia and Siemens visualise them, and goes on to report on other key developments from Nokia.

Key plusses for Nokia Siemens Networks are seen as follows:

  • based on current market share data, Nokia Siemens Networks will be the second largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market;
  • because of Siemens' interests in fixed-line telephony, Nokia Siemens Networks will play a global role in the topical convergence development;
  • pro forma revenues of Nokia Siemens Networks will be $15.8 billion in calendar year 2005 terms;
  • broader opportunities will accrue from advantages of scale and market strength; and
  • estimated cost synergies of $1.5 billion will emerge annually by 2010.
    The combined company will see Simon Beresford-Wylie as CEO and Peter Schönhofer as CFO. Their vision is the development and implementation of revenue-generating and cost-saving products, backed up by a leading R&D team, exceptional fixed-mobile convergence capability, a deep presence in both developed and emerging markets, and one of the industry's largest and most experienced service organisations.

In more specialised terms, the portfolio will comprise:

  • IMS
  • 2G
  • GSM/EDGE access
  • 3G
  • WCDMA/HSDPA access
  • extensive mobile core
  • fixed broadband transport
  • IPTV
  • LTE
  • WiMAX
  • low-cost mobile voice products tailored for emerging market operators

As there are currently overlapping capabilities, the initial headcount of 60,000 employees will almost certainly be reduced by 10-15% over the next two years. Operational headquarters for Nokia Siemens Networks will be Helsinki but three of the five divisions will be based in Munich.

Coinciding with the creation of Nokia Siemens Networks is the announcement by Nokia of five new mobile handsets which are intended to reinforce Nokia's position in the mobility and convergence market. The five are as follows:

  • Nokia 6151, a WCDMA-enabled phone with a 1.3 megapixel camera;
  • Nokia 6080, designed to be stylish and relevant to lifestyle requirements;
  • Nokia 1110i, geared towards messaging and time management;
  • Nokia 6275, set to meet the demands of CDMA markets, and including a 2 megapixel camera; and
  • Nokia 2875, with several 'fun' features such as video ring tones, video streaming, and an FM radio.

In another product launch, Nokia is introducing the Pico WCDMA Base Station, to allow network operators to leverage the performance benefits of HSDPA and capture more indoor network traffic, thus enhancing operator revenue opportunities.

Reflecting the growth of emerging markets like India, Nokia's Networks Business Group has announced its Managed Services business will be led from India effective July. Managed Services will keep a significant presence in Finland, but key driver is to leverage India's knowledge base and growth dynamics, her existing outsourcing industry ecosystem and her strong innovation forces. Nokia believes that this will support the accelerating growth of our Services business globally.

Another Managed Services development is that the Nokia Global Networks Solutions Centre in Chennai, India is now fully operational and on-track to support operator customers across the globe. The centre will perform network operation tasks for selected operator customers in Asia-Pacific and MENA.

Also set to benefit from the Chennai operation is Hutchison Essar. In a five-year managed service contract extension, Nokia will eventually run 19 of the 23 Hutchison Essar circles in India, as well as take on 200 Essar personnel, bringing the total of staff transfers to 800 (services comprise over 30% of Nokia Networks' revenues, and the figure is growing).

* As we post this story we have just learnt that Nokia and Sanyo's proposed new joint-owned CDMA device company will not now proceed. Negotiations announced on 24 February have led both parties to conclude that CDMA development will proceed more beneficially on an individual basis. These plans will be revealed shortly.



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