Nokia Siemens, a joint venture between Nokia Corporation (NOK) of Finland and Siemens (SI) of Germany, recently entered into a contract with Italy-based telecom operator Telecom Italia (TI) in an attempt to upgrade the company’s operating network.
It is believed that Nokia Siemens will deliver LTE infrastructure solutions to Telecom Italia’s 7000 Base Stations (BST). However, the terms of the deal were not mentioned.
Nokia Siemens, which is a major revenue generator for Nokia Corporation, contributed around 29.8% of the total revenue in 2010. Nokia Siemens provides wireless and fixed network infrastructure as well as networks service platforms to telecom operators and service providers.
During this month, Nokia Siemens won many such contracts. They have entered into a venture with Russia to provide LTE infrastructure solutions. They have also extended their contract with Indonesian tower network operator, Protelindo to provide network support to more than 5000 BSTs. Vodafone (VOD) operating in Tanzania has also outsourced their network management to Nokia Siemens.
Despite more contract wins by Nokia Siemens and 9% growth year over year, there was a drop in margin from 5.5% to 3.7%. Moreover, the recent acquisition of T-Mobile USA by AT&T (T) will affect Nokia Siemens business in the North American region, as T-Mobile was the main customer of Nokia Siemens while Alcatel-Lucent (ALU) and LM Ericsson Telephone Company (ERIC) are the main vendors of AT&T. Hence, we believe that the potential acquisition of T-Mobile by AT&T may eliminate NSN as a vendor for the merged entities.
We, thus maintain our long-term Neutral recommendation for Nokia Corporation. Currently, Nokia Corporationhas a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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