INTERVIEW: Nokia Siemens CEO Eyes USA for Future Growth
Published on: 5th December 2007
AMSTERDAM -(Dow Jones)- Nokia Siemens Networks, Nokia's joint venture with Siemens, is in a good position to grow in the USA, but expects network sharing and a reduction in investment by operators to weigh on the infrastructure sector in 2008, Chief Executive Simon Beresford-Wylie said Wednesday.
"We see the U.S. as a good growth opportunity," Beresford-Wylie told Dow Jones Newswires. "If you look at the pace of data that is coming into the markets now and the need to be able to handle that efficiently and effectively, LTE is coming onto the radar screen."
LTE, or Long Term Evolution, is a fourth-generation mobile technology widely expected to be one of the leading technologies for enabling mobile communications in the future.
Verizon Wireless said it is testing LTE as an upgrade path that would help it move closer to technology standards favored by many other cellular carriers around the world.
Beresford-Wylie said NSN is one of the chosen suppliers for the pilot. Combined with the company's relationship with T-Mobile, Deutsche Telekom's mobile arm, this is an example of NSN gaining traction in the massive U.S. market, where T-Mobile also has a significant presence, he said.
"It takes time," he said. "We need to build relationships over the next three to five years and draw on those. We are in a good starting position."
Beresford-Wylie's comments follow the company's Capital Markets Day, which was held Tuesday.
Still, the company said it was going to take longer to reach a double-digit operating margin than previously thought.
That's largely due to the same market conditions Swedish rival Ericsson has described since its unexpected profit warning in mid-October, which it attributed to slackening demand in wireless networking equipment.
Prior to the warning, Ericsson was thought to have been shielded from this contraction in the market. The company's shares dropped nearly 30% on the news that earnings would be heavily hit by a poor business mix.
Ericsson had said the root of the problem was higher sales in less-profitable new network rollouts and lower sales of lucrative software.
"I don't think there is anything that they said that we haven't seen," said Beresford-Wylie. "We probably just communicated it a little bit earlier."
He said because of the unfavorable business mix and the increasing amount of network sharing between operators, the company now sees "very slight growth" in the telecom infrastructure market, and expects to reach a 10% operating margin only by the end of 2009 rather than in early 2008 as previously forecast.
"We are seeing very, very slight growth in fixed and wireless, and good growth in services," Beresford-Wylie said. "It has the same shape and feel as this year," he said of 2008. The market for product-related services is expected to grow at 3% annually through 2011, while the standalone services market will expand at 9% per year.
Such service help carriers minimize the cost of maintaining and operating their networks, a revenue stream that is seen as increasingly lucrative for companies like NSN.
The company opened a service center in India partly to better position NSN for the future, Beresford-Wylie said. He said the company is gaining valuable service experience that will also be helpful in Europe.
"There is a discussion going on," Beresford-Wylie said about network sharing in Europe. "All of the operators I talk with in Europe are talking about managed services."
Vodafone and France Telecom's Orange recently formed a joint venture to make cost savings through sharing infrastructure. T-Mobile and Hutchison Whampoa's 3 have also had similar discussions.
He said NSN is passing up the chance to take a 40% stake in the estimated $2.05 billion GSM network contract with India's state-run Bharat Sanchar Nigam Ltd (BSNL), because the price per line was too low.
Ericsson has already won a $1.3 billion contract from BSNL to lay 60%, or 13.125 million, of a total of 22.75 million GSM lines. It is also considering taking on the remaining 40% stake.
Beresford-Wylie said a key growth area will be third-generation equipment for mobile networks based on the wideband CDMA standard. Sales of equipment for both of the older CDMA and GSM networks are likely to decay in 2008, he said.
At 1530 GMT, Nokia's shares were up EUR0.48, or 1.8%, at EUR26.85.
-By Adam Ewing, Dow Jones Newswires; +46 8 545 130 95; email@example.com
(END) Dow Jones Newswires