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    Nokia and Siemens to converge for convergence


    Nokia and Siemens have increased the pace of equipment vendor consolidation by agreeing to form a joint venture merging the carrier and operator-focussed businesses of both companies. The new company will be called Nokia Siemens Networks.

    In what the companies are describing as a 50/50 venture, the companies will form a unit which, in 2005, would have had combined revenues of €15.8 billion. The companies think that they can strip €1.5 billion cost out of the combined business by 2010, including cutting an initial 60,000 workforce by 15% over the next four years.
    Although the venture is described as a 50/50 venture, the headquarters will be based in Helsinki, and Nokia man Simon Beresford-Wylie will head up the business.
    The company’s portfolio will include next generation network convergence products like IMS, 2G GSM/EDGE access, 3G WCDMA/HSDPA access, extensive mobile core, fixed broadband, transport, IPTV, LTE, WiMAX and low-cost mobile voice products tailored for emerging market operators
    Some questions remain unresolved. The tie-up will also bring Nokia into close contact with NEC, with whom Siemens has jointly been winning 3G business. The companies have also had a different attitude to some areas of fixed mobile convergence, with Nokia a strong supporter of UMA and Siemens taking a less prescriptive view.
    The deal also leaves Ericsson, Nortel, Motorola as the last of the stand-alone Western mobile equipment vendors. With Motorola not exactly setting the 3G world alight in infrastructure, and Nortel too some way down the league table, it may be there is more consolidation to come.
    With the focus either on low cost growth in emerging markets, or low cost operation and expansion in mature markets, equipment vendors are being forced to meet ever more tight margins. Competition from the Chinese vendors has added to the price squeeze.
    One surprise of this deal is that many had surmised that Nokia might look for a sale of its networks business, leaving to concentrate on its reinvigorated device and software businesses.
    But this deal suggests Nokia still sees advantage, with IP convergence a reality, in operating as a vertically integrated, end-to-end provider. Its recent launch of a hosting business emphasises that point more so. One possibility of course is that some kind of float or sale of the Nokia Siemens business is planned for the future.