The recently announced Nokia and Siemens service provider merger will make it the third largest carrier network inf...
June 26, 2006
The recently announced Nokia and Siemens service provider merger will make it the third largest carrier network infrastructure vendor after Ericsson-Marconi and Alcatel/Lucent with combined sales of US$19.75 billion and a headcount of about 60,000.
“For Nokia, organic growth to reach the level of scale shown by the major players was not feasible because it would take too much time, so acquisition was the solution,” said Sergio Cruz, Research Manager at Pyramid Research.
The joint venture, which was announced last Monday, will consist of Nokia’s Networks Business Group and Siemens’ carrier related operations for fixed and mobile networks.
The research firm notes that the carrier network infrastructure industry has been taken to another level of operation in the last year due to the consolidation of Alcatel and Lucent and the performance of Ericsson.
The new Nokia Siemens Networks will have greater purchasing power and with platform commonality, equipment costs could be reduced by 45% according to the new company’s sources, allowing it to compete in this new environment.
Consolidation also extends to the operator level with the top 10 mobile conglomerates controlling 40% of total global subscribers.
The operators are increasingly moving their contract to single companies for greater negotiation power, creating a need for vendors to balance this situation by growing themselves.
“We expect further consolidation to take place because the ‘operating point’ of the industry has changed,” said Cruz.
“The sale of telecommunications equipment is a game of economies of scale and scope. As operators consolidate their fixed and mobile operations, vendors must increase their size to better negotiate contracts.”