In a major boost to its fragile top-line, Nokia Siemens Network together with LM Ericsson AB (ERIC) has been selected by TeliaSonera AB (TLSN) to provide radio network solutions for its nationwide next-generation (4G) LTE network deployment. Nokia Siemens Network is a 50-50 joint venture between Nokia Corp. (NOK) and Siemens AG (SI). TeliaSonera will roll out a super fast LTE network in 25 municipalities in Sweden and 4 in Norway. The joint venture also received another contract from SaskTel of Canada to build its mobile packet core network.
According to our view, these contracts are highly critical for the survival of Nokia Siemens Network. The company is the second largest telecom infrastructure developer of the world with a 20% market share. Despite this, it has a very limited presence in the most lucrative North American markets. Its attempt to purchase CDMA and Metro Ethernet assets of bankrupt Nortel Network failed in the bidding process.
Meanwhile, Nokia Siemens Network failed to clinch a deal with Telenor ASA (TELN) in Norway for the latter’s strategic network upgrade contract. Proximus, the mobile services wing of Belgian telecom operator Belgacom SA also plans to replace its entire radio access networks across GSM, UMTS, as well as LTE, with Huawei Technologies’ SingleRAN base stations. The base stations that will be replaced would be from Nokia Siemens Network.
Management of Nokia Siemens Network has already predicted that the company’s loss of global market share will be more than what was estimated earlier. In the third quarter of 2009, the company generated Euro 2.8 billion revenue, down 21% year-over-year and also down 14% sequentially. Gross margin was 28.2% compared to 30.8% in the same quarter of the previous year. Operating loss was Euro 1.2 billion compared to an operating loss of Euro 1 million in the prior-year quarter. In the same quarter, the company expensed Euro 908 million as goodwill impairment.
Nevertheless, in the last one month, Nokia Siemens Network has taken several steps to improve its financials. The company is now giving more competitive bid prices for any contract. We believe this may be the primary reason for the TeliaSonera contract win surpassing Huawei Technologies. Furthermore, the company has decided to cut 5,760 jobs as part of a major restructuring program. This will help the company reduce operating expenditure by around $732 million by end 2011.
Read the full analyst report on “NOK”
Read the full analyst report on “SI”
Read the full analyst report on “ERIC”
Read the full analyst report on “TLSN”
Read the full analyst report on “TELN”
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