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Nokia-Siemens Restructure Operations

Zacks Equity Research

Nokia-Siemens Network (‘NSN’) – a 50-50 joint venture between Nokia Corporation (NOK) and Siemens AG (SI) has decided to merge its Middle East and Africa (MEA) business into one single entity and has combined the new division with the Asia operations. According to the company, the operational rejig will allow NSN to better serve its large customers.

Following the restructuring, NSN’s operational headquarters will shrink from ten to six, which includes AMEA, Latin America, North America, and the three subdivisions of Europe. Igor Leprince, who was previously heading NSN’s Middle East business, will head the newly formed MEA division, which includes the Africa operations. Executive board member, Ashish Chowdhary will lead the Asia, Middle East and Africa (:AMEA) business which include the entire cluster of MEA, India, Asia-Pacific, China and Japan.

The transformation will help Espoo, Finland-based NSN to provide a more integrated service to its customers thereby improving its service quality across the region. Precisely, the telecom equipment manufacturer will be in a better position to deliver quality service to its multinational customers, who are expanding their operations in different countries across the AMEA.

The leading telecom equipment manufacturer — NSN has been going through a tough time for quite some time now. 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.

Historically, MEA has been a key market for NSN and has operations in 30 countries across the regions. The MEA region has witnessed steady demand for TD-LTE (Time Division Long Term Evolution) and FDD-LTE (Frequency Division Duplexing Long Term Evolution) based wireless broadband technologies among different carriers.

NSN has won a contract from Vodacom, which was the first operator in South Africa to launch LTE service. Moreover, in Asia, the company has won a couple of network contracts from the world’s largest operator China Mobile Limited (CHL) in the last two months.
There are some other multi country operators like Bharti Airtel, Etisalat and Qtel, who are planning to upgrade their network in different parts of Asia and Africa. We believe bringing both the continents’ operation under a single fold will allow NSN to serve the different need of these large customers’ from the same source thus reducing their hassles.

We retain our long-term Neutral recommendation on Nokia Corp. Currently, it holds a short-term Zacks #3 Rank (Hold).

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