Looking to the future

Malaysian Business, Mar 1, 2007 by Cynthia Ann Peterson

THE 3GSM World Congress 2007 in Barcelona, Spain, brought together the who's who of the telecommunications industry for four days, who shared their vision and plans to shape the future of communications. Fittingly, this was the setting for the launch of Nokia Siemens Networks, a 50:50 partnership between the telco infrastructure giants that is expected to be completed in the first quarter of the year.

"Always on" connectivity is expected to touch five billion people by 2015, and this new entity is being made ready to seize the opportunities that will arise. CEO-designate Simon Beresford-Wylie says that while Nokia Siemens Networks will have to scale to compete, it is just a starting point. `As the world of telecommunications changes, we will also create customer value through innovation, speed and deep end-user insight,' he says.

Although the planned merger is yet to be completed, Nokia Siemens Networks announced its six future business units - Radio Access, Service Core and Applications, Operation Support Systems, Broadband Access, IP/Transport, and Services - to assuage customer concerns. `Our customers have responded positively to the proposed merger and, with this announcement, we aim to justify their faith in us. Our customers have crucial decisions to make about their business going forward, therefore clarity for them about our planned portfolio is a key strategic priority,' says Mika Vehvilinen, chief operating officer-designate.

Highlights of the proposed portfolio plan include the continued development of GSM/EDGE (Global System for Mobile Communications/ Enhanced Data rates for Global Evolution) radio and WCDMA (Wideband Code Division Multiple Access)/HSPA (High Speed Packet Access) Node Bs with the radio portfolio plan rounded out with Nokia's mobile and Siemens' fixed WiMAX (World Interoperability for Microwave Access) solutions; a single lead solution for IP Multimedia Subsystem (IMS), mobile and fixed soft switches, Media Gateways (MGW), Push-to-Talk over Cellular (PoC), Intelligent Networks (IN), Packet Core, Mobile TV (DVB-H) and IPTV (Internet Protocol TV), and converged charging.

The proposed plan also includes migration to a common microwave transport solution and a single IP DSLAM (Internet Protocol Digital Subscriber Line Access Multiplexer) solution, one umbrella solution for managing convergent and multi-vendor networks with a fault, performance and configuration management portfolio based on Nokia's NetAct platform and a global services capability supporting more than 300 fixed and 300 mobile clients in over 100 countries.

Regional impact

Nokia's strength in mobile networks and Siemens' strong footprint in fixed networks will enable the new entity to offer a strong end- to-end portfolio. With the pains of integration and headcount reduction being addressed, the merged entity is keen to keep addressing the market. The Asia Pacific (excluding Japan) telecoms services market is expected to grow 10% to over US$202 billion this year, and the networking equipment market, to over US$8 billion, according to market analyst IDC. The merger is expected to have a positive effect on the region's booming market.

`The merger will position Nokia Siemens Networks in very good stead in the wireless segment, right behind Ericsson. As it stands, this new entity is poised to challenge the market leadership of Ericsson. That aside, Nokia-Siemens Networks will still face stiff competition from the Chinese vendors, particularly Huawei, which is fast gaining market share in Asia- Pacific,' says Teyew Sin Siew, director of Telecoms, ICT Practice, Frost & Sullivan Asia Pacific.

The merger will present an immediate product portfolio advantage for Nokia-Siemens Networks with an overlap in the wireless segment, but it does give operators fewer service provider choices. `Both Nokia and Siemens operate in the GSM and WCDMA segments and have similar customer concentration in Europe and Asia. Nokia Siemens Networks is expected to provide greater product definition in the long run and retain only some of its products. This translates into fewer choices for service providers,' says Teyew.

Malaysia is the designated host for Nokia Siemens Networks' Asia South operations, and the merger is expected to go down well in the market. `In Malaysia, the merger fits in well as each individual company has different customers. The new company will have wider coverage of the service providers in Malaysia, especially in the wireless space, helping it to close the gap with Ericsson. We believe that the new entity will focus on services to bring value and differentiation to service providers,' says Teyew.

Merger trend

The proposed formation of the new entity is certainly in keeping with the trend of recent telecommunications mergers, with Alcatel- Lucent recently coming together to be second behind Swedish market leader Ericsson. However, Nokia Siemens Networks looks set to overtake Alcatel- Lucent to challenge Ericsson for the top spot. Mergers have created companies in a better position to offer a more comprehensive portfolio, but what of the single entities such as Nortel Networks or Motorola?