HomeInsights3GSM Day One Report

    3GSM Day One Report


    Nokia Siemens Networks takes unsteady first steps

    By Keith Dyer, at 3GSM, Barcelona

    Try as they might to pretend it doesn’t matter, it must have been disappointing for Nokia Siemens Networks only to be able to “soft launch” the company.

    Due to have hit the ground running at the beginning of the year, the target for commercial launch is now “first quarter” 2007, pending the growing investigation into the Siemens Comms backhanders scandal. The company is here with its brand, with its proposed product portfolio and with appointments made down to the fourth tier of management.

    Referring perhaps to the current holding pattern, ceo designate Simon Beresford-Wylie said, “We were ready and we will be ready for day one.”

    Yet in what felt like a slightly under-rehearsed presentation, he somewhat stumbled his way through the brand (if not the commercial) launch of the soon-to-be inaugurated Nokia Siemens Networks.

    SB-W said that the two mega trends driving the industry were mobility and broadband. “Value chain boundaries” were blurring, and moving fast, there is “massive, massive cost pressure on every element of the sector. But although that cost pressure was hitting margins, it was driving great technological innovation, he said. It was also leading to sector segmentation and some technology fragmentation.

    This meant that NSN would need to respond by developing “solutions” appropriate to the market it is playing in. “We need to go from a technology-driven industry to an internet driven one,” SB-W said, “and we need to lose the religion. We have faith in GSM/ EDGE/ WCDMA but equally we see the opportunity in WiMAx. It’s about having the right technology for the right customer, the right market and at the right cost structure.”

    What would this mean for NSN? Well, SB-W said that the company had the broadest technology portfolio, from radio access to core network and transmission to OSS and support services. This would enable it to take advantage of the mega trends that are driving the industry.

    The company would need to start moving to the “rhythm of the internet”, he said, in terms of its ability to develop and implement technologies. He also said the company aimed to be a “loyalty leader”.

    In terms of the product portfolio, where there is a big overlap between products and a large installed based, for example in Base Stations, the company will continue to offer support for both legacy products. But future development will be on a single-track, converged product basis. So the nascent LTE programmes, for instance, are being merged. Where there is only a little overlap, then basically only the strong will survive. One of the current solutions will bite the dust. Where there is no overlap then obviously everyone is happy.

    The company has identified €1.5 billion in “synergies savings” annually, with 40% of that coming from R&D. Asked how the company could cut total R&D to that extent whilst continuing to exploit new technologies, SB-W rather sidestepped the issue. But the company will still be in the top 40 globally in terms of R&D spend, he said.

    Christoph Caselitz, CMO (designate), said that the company could claim to be joining the leading FMC and fixed provider (Siemens) with the leading mobile player (which is arguably not true in either case). Even so, combined sales of €22 billion in Western and Southern Europe puts the company second in the continent, and €21 billion puts it first in Asia Pac. The company is number six in the US, and number three in China,

    Caselitz, normally very clear, seemed to be getting a bit confused though. Integration of the business would be “a complex but also a rather easy process”. The company would be new, young, innovative, passionate and pragmatic. It would “understand and unite communities.” There was also a separate announcement that Siemens’ existing 3G relationship with NEC would continue within the new company.

    Mikka Vehvilainen, COO designate said the company was number one in WCDMA and EDGE, number one in IMS and number one in packet core and converged charging. This was interesting because earlier in the day Ericsson had said it was clear number on in HSPA and also number one in IMS. Let battle commence.

    Buzzword Bingo – Very High. “End to end solutions”  “Connecting communities” “Communiciations enabler” “Total Value of Ownership”
    New coinage – Medium.  “Loyalty leader” “Internet rhythm”
    New stuff: Zero

    Earlier, at Ericsson’s do, Carl Henric Swanberg, the impressively square jawed ceo, said that the company was pushing ahead with its three prong strategy on networks, multimedia and services. The company was leading in mobile systems, and is the only company left with R&D commitment to GSM, he said. Any player in the market needed scale, service capability and technology. And they needed to be able to respond to markets which have to be profitable on a user base generating $2 per month ARPU. 2006 was a “breakthrough” year for HSPA and Ericsson now has a 40% share of that market.

    Content is only one part of the business. It’s about securing business with telecoms grade reliability and revenue assurance solutions.

    The company needs to be more open minded about its partnerships and how it will secure business.

    The company’s market share had risen because “the weaker players such as Alcatel Lucent” had lost business quicker than we thought”. Ouch.

    Network sharing, far from being a threat to equipment sales is an opportunity, because BTS node is only 15% of the installed cost of a base station. The other 85% is where the savings from network sharing lie, and then you need management and services to control the shared network.

    Marconi, Redback and new acquisition Entrisphere give the company all the presence it needs in IP access and multi service edge access capability, but Ericsson may yet look for some bolt on buys in other areas.

    IMPRESSIVE STAT: The company rolled out 18,000 base stations in India alone in 2006, which was one every half an hour or so, 7/24/365. And there will be more in 2007.
    Buzzword Bingo – Low. “Importance of scale”
    New Coinage. Zero
    New Stuff: An embedded HSPA module for laptops; contracts for managed services and hosted services; Acquisition of Entisphere; IMS win with Swisscom. And…a femto cell, last week.