Nokia Solutions and Networks (NSN) is betting big on Vodafone’s $11.2 billion Project Spring project and telecoms in Japan and South Korea, where carriers have been upgrading their infrastructure.
NSN CEO Rajeev Suri on Wednesday said he expected operators in Europe to begin investing in network equipment, led by Vodafone’s $11.2 billion Project Spring investment program, which aims to improve the speed and coverage of its networks. ( Vodafone Group Capex to go up by $1.6 billion to $11 billion by 2016 March )
“This could lead to a possible Capex (capital spending) catch-up in Europe,” he said. “The big ones still need to happen. You need a big one to act and then others follow. That’s how it always happens in every market in our sector.”
He also said he hoped for more deals to follow its contract with U.S. operator Sprint, although he expected the U.S. market to show flat to modest growth in the next few years.
Suri said the telecom equipment vendor would focus on expanding sales after years of concentrating on cost cutting and ditching unprofitable contracts to improve margins.
Reuters reported that NSN, Nokia’s telecoms equipment unit, did not rule out acquisitions to expand the business. Earlier media reports suggested that NSN would look at Alcatel-Lucent for acquiring its wireless business.
“It would be unwise for us not to scan the market and see what’s available. Of course we’ll do that,” Suri said.
Cuts, including a drastic restructuring plan that slashed around a quarter of NSN’s workforce, and the ditching of unprofitable service contracts, have helped NSN turn profitable.
The unit’s improved finances and cash from the Microsoft deal are seen providing the new Nokia ammunition to go after smaller rivals.
Suri says that it was not always necessary to acquire weaker rivals. “We don’t have to do deals for the sake of deals, just because we have money. I am a believer in market forces determining the outcome. I’m a believer in just wait,” Suri said.
NSN, a joint venture of Nokia and Siemens until Nokia bought out the German company’s stake in August, will account for over 90 percent of the group’s sales.
It booked an underlying profit for the sixth straight quarter in the three months through end-September. Yet net sales in that quarter fell 24 percent from a year earlier. ( NSN third quarter revenue nosedives 26 percent to $3.6 billion )
All telecom vendors are feeling the heat due to decrease in network expansion by mobile operators. Ericsson revenue dipped 3 percent to $8.4 billion in the third quarter. Its net income increased 38 percent to SEK 3 billion.
NSN is betting on China Mobile’s LTE project as well. “We have made some choices recently in terms of taking a long-term view of profitability and saying ‘trade some of that profit for top line’,” he said, citing as one example its October deal to supply China Mobile’s high-speed wireless broadband network.
