Nokia Siemens Networks (NSN), a venture owned by Nokia and Siemens AG, has made ambitious plans of setting up shop in the United States, a move its Chinese competitors have struggled to do owing to resistance by the US government in allowing Chinese companies into the strategic communications sector. According to Rajeev Suri, Chief Executive Officer of NSN for the fourth year running, the mobile phone markets in Korea, Japan and the US are characterized by a focus on monetizing data, owing to the exponential rise in data use and increase in demand for better data services, and is thus a more lucrative opportunity than markets in the Middle East and Africa.
NSN’s Chinese rivals, Huawei and ZTE have faced trouble landing orders in the US owing to a statement made by the US House of Representatives Intelligence Committee, which said that Chinese phone-makers were providing the Chinese intelligence services opportunities for espionage by disrupting and hacking into US telecommunications networks. Even though the Chinese Commerce Minister refuted such claims, Chinese communications companies have done very little business in the US.
One of the major mobile hardware companies in the US, called Alcatel-Lucent, has seen heavy losses in recent years and its stock price now stands at a 23 year low. According to Sami Sarkamies, a Nordea Bank AB analyst in Helsinki, resistance by the US government against Chinese equipment companies coupled with the downfall of Alcatel-Lucent has opened up a ripe window of opportunity for Nokia Siemens to grab market share in the hyper-competitive communications hardware market in the US.
Nokia has been having a great run in the stock market in recent weeks, with a 34% increase in just the last week alone. Siemens saw its own stock drop 0.1% to 78.23 euros at the close of the market yesterday. NSN has undergone massive restructuring which involved elimination of 17,000 jobs, a clean 23% of the total, just to sustain the company’s profit margins. Once production costs were deducted, a gross margin expansion of up to 32.2% was seen in the last quarter, topping market leader Ericsson’s 30.4%.
NSN has managed to turn around an ailing company which Nokia had actually considered selling at one point in time, and has clocked global revenue of 3.5 billion euros in the last quarter. In May 2012, NSN secured a deal with Deutsche Telekom AG’s U.S. unit to build a faster and more efficient wireless network to meet rising demand for data. Additionally, AT&T, the second-largest U.S. wireless carrier, and Verizon Wireless have given NSN smaller deals, opening doors for future bigger ones.
