Nokia Siemens Networks (‘NSN’) – a 50-50 joint venture between Nokia Corporation (NOK - Analyst Report) and Siemens AG – has won two different network orders in quick succession from telecom giant China Mobile Ltd and Telefonica S.A. (TEF - Analyst Report). This successive order wining reflects the company’s ability to serve diverse network needs of different customers.
Under the agreement, NSN will deploy China Mobile’s Serve atOnce Intelligence customer and business network analysis tool in the Guangdong region of China. The new analysis tool will provide information regarding customer usage and preference. It is also expected to allow the largest telecom carrier in the world to increase customer loyalty and add new revenue streams.
In another agreement, NSN will upgrade the existing GSM and 3G network of O2 (Telefonica UK) with radio access network technology to provide LTE (Long Term Evolution) services across London and south east of England. The contract includes installation of NSN’s NetAct network management system that will allow consolidated configuration, monitoring and network optimization across the network.
The leading telecom equipment manufacturer NSN has been going through a tough time for quite some time. Though the company has a strong GSM portfolio, it lacked severely on the CDMA front, which is the most dominant network used in the lucrative North American market.
In order to overcome this and reduce operating costs, the company is retrenching employees and selling its non-core business units. NSN plans to lay off 17,000 or 23% of its work force and expects the restructuring to result in an annual cost reduction of approximately $1.35 billion by 2013. The company has trimmed about 13,000 of its work force and has made five divestments, so far this year.
In the last two months, the company has won two network contracts from China Mobile and South Africa’s Vodacom. Addition of these latest contracts will only consolidate its falling network business which has been subject to huge cash losses for quite some time.
Additionally, winning business in the mainland and pitting Chinese rival in their own backyard could be viewed as a positive for NSN, which has been facing tough competition from ZTE and Huawei technologies.
We retain our long-term Neutral recommendation on Nokia Corp. Also, it holds a Zacks #3 Rank, implying a short-term Hold rating.