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Nokia Siemens says improving profitability key focus

Telecom equipment maker Nokia Siemens Networks will concentrate on improving profits for its recently-merged company rather than chase growth merely to build market size, Chief Executive Simon Beresford-Wylie said Tuesday in London.

He said Nokia Siemens Networks is paying particular attention to rational network deals and won't look at contracts that don't provide accepted levels of profitability.

"We need to be rational and not just in terms of profitability, but cash flow elements as well, because quite often a lot of these large rollouts tie up a lot of working capital," he told Dow Jones Newswires.

He said he isn't prepared to be "silly" with margins, or commit to terms and conditions that tie up so much cash that it creates a balance sheet issue.

He pointed to the large GSM deal for India's state-run Bharat Sanchar Nigam Ltd last year. Swedish rival Telefon AB L.M. Ericsson took a 60% stake in the deal for about $1.3 billion. NSN decided not to accept the remaining 40% of the contract, calling the pricing "irrational."

He said there are several new licenses coming up in India but he is looking at them "though very prudent eyes" in terms of how many more operators the market can sustain. Beresford-Wylie said he would view new opportunities in that market with a great deal of caution."If we do them, they need to be with financially sound companies and on reasonable terms and conditions."

GSM, or global system for mobile communications, is the most widely-adopted standard for mobile phones globally and constitutes nearly 80% of the wireless market in India now.

Beresford-Wylie said NSN will push to develop business with current customers rather than looking at new operators."The landgrab days are effectively over," he said.

He also pointed to a lopsided value distribution in the telecoms sector, saying it's making it increasingly difficult for vendors to profit, especially when infrastructure market growth is stagnant.

He said revenue, operating profit and market capitalization of many of the world's largest operators over the past two years dwarf the respective figures shown by leading industry equipment makers.

The profitability challenge is partially due to heavy research and development costs on the vendor side as well as aggressive pricing pressure for new business.

Beresford-Wylie said key ways for NSN to tackle this problem are to focus on profitable business, to work with the company's current customers, to build on higher-margin software sales and to use its global presence.

NSN was created as a joint venture between Finland's Nokia Corp. and Germany's Siemens AG just over a year ago. The company reported sales of EUR3.40 billion in the first quarter of 2008 but has yet to become profitable due to the continued costs of creating the joint company.

Источник: Total Telecom

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