Light Reading
The fate of Nokia Siemens will shape the landscape of the global telecom infrastructure market during the next 10 years

Who's Going to Buy NSN?

Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
8/1/2012
50%
50%

So who's going to buy -- or merge with -- Nokia Networks ? This question has been out of the headlines for a while, but its eventual answer will have an important bearing on the landscape of the global telecom infrastructure market during the next 10 years.

It'll be a while before this question is answered. NSN has only just started the sort of restructuring of its organization, workforce, pension liabilities and the like that will need to be substantially complete before a sale can be agreed. And the fate of Nokia's huge 2G, 3G and 4G IPR portfolio -- and NSN's access to it -- is also set to feature front and center in deliberations and negotiations.

As and when the fog begins to clear around these issues, the longest shot of all acquirers, in my view, are the Chinese. ZTE would undoubtedly give anything for NSN's global account footprint -- and some of its mobile infrastructure products –- but it's questionable whether it is culturally ready for such a move, questionable whether Siemens and Nokia would be willing to sell to ZTE- and questionable whether it would meet with approval at the relevant political levels. Some of the same factors apply in the case of Huawei, albeit with a generally superior product portfolio to ZTE's, and already rivaling Ericsson as the world's largest telecom infrastructure vendor, Huawei has less to gain.

Next up is Alcatel-Lucent. The corporate cultures of Alcatel-Lucent, Nokia and Siemens are all steeped in the concept of "European industrial champions," nurtured, aided and abetted by the institutions of the EU. With NSN finding it hard going on its own, there are still the remnants of a reflex in European business and political circles that says that Alcatel-Lucent is the right partner, European champion-wise.

It's an idea that's increasingly easy to shoot down, however. In the first place, the last thing two hard-fought merged companies need is another hard-fought merger. And second, wherever the balance between nation state and centralized European institutions comes to rest once the continent's current turmoil eventually subsides, it will certainly be a good while before that settlement is reached. In the meantime, Germany, Finland and France cannot be counted on to act in the wider interests of "European champions" to the extent that they could in the relatively recent past.

The first of the serious contenders, in my view, is the private equity sector. Granted, talks with various of these companies broke down a year ago, but they are unlikely to have disappeared from the scene altogether. Don't ask me which ones, but the right deal from the right partners could still be potentially attractive to NSN's shareholders.

Among prospective vendors, I'd have Samsung down as the next most likely candidate. The company is showing real commitment to the mobile infrastructure business. Building on an already sizeable 3G and 4G infrastructure footprint in South Korea, Japan and the U.S. Samsung has built up significant credibility in the LTE infrastructure market, featuring on the approved short-lists of a number of the major global carrier groups. Now in India, Samsung is believed to have won the first-phase TD-LTE infrastructure rollout for Reliance Industries. NSN would provide Samsung with a tremendous global footprint to build on. And with its strong commitment to both mobile infrastructure and mobile devices, no other prospective bidder has as much to gain as Samsung from gaining access to Nokia's IPR -- or indeed, from acquiring both Nokia and NSN. That said, Samsung would need to make a very marked break with its own corporate tradition and culture to take on such a large European acquisition. The real extent of the company's willingness to go through with such a move is likely known by a select few in Seoul, South Korea.

Ericsson should inevitably be considered a strong contender. Remember when Ericsson bought Nortel's mobile infrastructure assets three years ago? That was actually a key fork in the road in NSN's relative decline since, also triggering the resignation of then-CEO Simon Beresford-Wylie. That was no coincidence either, because preventing NSN from buying a ready-made foothold in the U.S. 3G and 4G market was a more important motivation for Ericsson than securing an extension to the large U.S. footprint that it already had anyway. Why should Ericsson buy NSN now? To consolidate its leadership position and maybe tick some "European Champion" boxes, insofar as they count these days. And just because they can. It would be ironic in a number of ways -- but don't bet against it.

Sticking my neck out, I'm going to plump for NEC as the most likely acquirer. I have no inside intelligence to go on here -- just going on a combination of NEC's historic commitment to the global mobile infrastructure market, together with evidence of a significant change in the international M&A outlook on the part of Japanese corporations in the last couple of years.

The historical evidence points to NEC having a strong interest in NSN -- the W-CDMA joint venture between NEC and Siemens was actually tremendously successful in leveraging NEC's early lead in W-CDMA technology and combining it with Siemens' formidable account muscle in Europe and parts of Asia (and even the U.S. at one stage). Back in 2005, the Siemens-NEC joint venture was neck-and-neck with Ericsson and Nokia Networks, with more than 25 percent market share in W-CDMA infrastructure. Those hard-won gains then dwindled away as Siemens exited the joint venture to partner with Nokia Networks in NSN -- leaving NEC to pull in its horns and retreat back to Japan.

These days, however, leading Japanese corporations are increasingly taking a much more acquisitive outlook with respect to international markets. Japan's economy has been stagnating for years, and the Japanese population itself is also expected to decline markedly. There is a lot of momentum on the part of "Japan Inc." behind refocusing on international markets as well as learning from past mistakes. And clearly one of those past mistakes was pussyfooting around half-heartedly. According to Dealogic, an investment research firm, overseas mergers and acquisitions by Japanese companies reached $84 billion last year and are expected to hit an even higher number this year.

It would certainly take a marked break in NEC's corporate culture to take the plunge and commit to a telecom infrastructure acquisition of the size of NSN, rather than dip its toe in the water as it has done in the past. But the business environment in Japan and internationally is changing: What would have been unthinkable some years ago could yet provide the answer to the NSN question.

— Patrick Donegan, Senior Analyst, Wireless, Heavy Reading

(6)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Kevin Mitchell
50%
50%
Kevin Mitchell,
User Rank: Light Beer
12/5/2012 | 5:25:01 PM
re: Who's Going to Buy NSN?


Interesting analysis Mr Donegan!


So we could have NSALUN or NSNN or NSSN, but unlikely NSZN or NSHN. Maybe NSEN too.


Or ALU and NSN could merge and spit out the LU and merge that with another N but of North America, the former Nortel, now part of GENBAND. So NSAN and GENBLAND.

odyssey_2010
50%
50%
odyssey_2010,
User Rank: Light Beer
12/5/2012 | 5:25:00 PM
re: Who's Going to Buy NSN?


Mobile station is almost the same as PC, and the Base Station will be similar to servers with the help of new microprocessor, fiber and cloud-base structure. It's possible that IBM, Intel, Oracle and Apple will think about buying a telecom vendor, such as NSN. Remember, they are very rich now.

pdonegan67
50%
50%
pdonegan67,
User Rank: Light Sabre
12/5/2012 | 5:25:00 PM
re: Who's Going to Buy NSN?


Well to be clear I don't think ALU and NSN is that strong of a prospect but since you mention some of the potential fun 'n games with post-merger names it's worth recalling that we were mercifully spared a three-way merger of Alcatel, Nortel and Lucent which, as one wag pointed out at the time, could potentially have given us NotAcLu....

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:25:00 PM
re: Who's Going to Buy NSN?


I'm rooting for NEC-NSN to eventually get bought by IBM, just for the TLA potential.

digits
50%
50%
digits,
User Rank: Light Beer
12/5/2012 | 5:24:52 PM
re: Who's Going to Buy NSN?


Even with a slimmer portfolio, I wonder if the product portfolio of NSN might be too much for an IT company...


But, don't rule anything out! There have been plenty of surprises in the past year or two. And there's no doubt that the combination of IT, IP and telco know-how is the sweet spot now.

Gabriel Brown
50%
50%
Gabriel Brown,
User Rank: Light Sabre
12/5/2012 | 5:24:36 PM
re: Who's Going to Buy NSN?


In the fullness of time, if anyone, why not Ericsson?


Here are five reasons why it's not as outlandish as it sounds:


1/ It has the best chance (skills, processes, scale) of being able to transition the very large NSN footprint over time


2/ It will need added scale to stay ahead of Huawei mid- to long-term


3/ The old emnity between Nokia and Ericsson is fading; the world has moved on


4/ Customers would, on balance, be happy to see NSN go to a good home (rather than, say, private equity)


5/ Might the IPR issues be easier to settle?

More Blogs from Heavy Lifting Analyst Notes
Telecom operators are deploying new technologies in their data center environments to reduce costs and increase revenues.
The cloud debate has moved on to the network capabilities needed to meet customers' demands, with SDN and NFV at the heart of discussions.
When might operators put their NFV strategies into action in the mobile core? And what's in it for them?
Because of difficulty acquiring spectrum, many utilities are forgoing LTE, and turning to legacy technologies such as CDMA and WiMax.
The machine-to-machine (M2M) and Internet of Things (IoT) markets will grow exponentially, requiring more robust testing solutions.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Using Service Quality to Drive WiFi Monetization

10|22|14   |   6:51   |   (0) comments


Live from the SCTE conference: Heavy Reading's Alan Breznick explores the forces shaping the WiFi opportunity in an interview with CableLabs' Justin Colwell and Amdocs' Ken Roulier.
LRTV Custom TV
Distributed Access Architectures – 2

10|21|14   |   8:51:00 AM   |   (0) comments


ARRIS CTO Network Solutions Tom Cloonan discusses why many if not most MSOs will continue with integrated CCAP, while addressing why some are also looking at two futuristic, distributed access architectures: Remote PHY and Remote CCAP.
LRTV Custom TV
Distributed Access Architectures – 1

10|21|14   |   9:01   |   (0) comments


SCTE Sr. Director of Engineering Dean Stoneback discusses the pros and cons of distributed access architecture (DAA) and its various forms, which range from basic Remote PHY to full CMTS functionality in the node.
LRTV Custom TV
The WiFi Road to Riches – 2

10|21|14   |   3:58   |   (0) comments


ARRIS Senior Solution Architect Eli Baruch talks about how MSOs can enable public and community WiFi through 1) outdoor access points, 2) businesses seeking to offer WiFi to customers, and 3) residential WiFi gateway extensions.
LRTV Custom TV
The WiFi Road to Riches – 1

10|21|14   |   10:15   |   (0) comments


SCTE Director of Advanced Technologies Steve Harris discusses WiFi deployments, drivers, challenges and advances, including 802.11ac, carrier-grade WiFi, community WiFi, Hotspot 2.0, Passpoint, WiFi-First and voice-over-WiFi.
LRTV Custom TV
Advantech Accelerates 100G Traffic Handling

10|17|14   |   7:56   |   (0) comments


Paul Stevens from Advantech explains why handling 100GbE needs a whole new platform design approach and how Advantech is addressing the needs of equipment providers and carriers to give them the flexibility and performance they will need for SDN and NFV deployment.
LRTV Huawei Video Resource Center
Holland's Imtech Traffic & Infra Discusses Huawei's ICT Solution and Services

10|16|14   |   4:49   |   (0) comments


Dimitry Theebe is from the business unit at Imtech Traffic & Infra which delivers communications solutions for transportations. His partnershp with Huawei began about a years ago. In this video, Theebe speaks more about this partnership and what he hopes to accomplish with Huawei.
LRTV Huawei Video Resource Center
Huawei's Comprehensive Storage Solutions Vital for SVR

10|16|14   |   6:16   |   (0) comments


SVR Information Technology provides cloud services for academic and special sectors. With Huawei's support, SVR and Yildiz Technical University has established Turkey's largest and most advanced High Performance Computing system. CSO Ismail Cem Aslan talks about what he hopes Huawei's OceanStor storage system will bring for him.
LRTV Huawei Video Resource Center
Mexico's Servitron's Impression of Huawei at CCW 2014

10|16|14   |   6:35   |   (0) comments


Servitron is a network operator in Mexico that has been in the trunking industry for the past 20 years. Its COO, Ing. Ragnar Trillo O., explains at Critical Communications World 2014 that his company has been interested in the long-term evolution of LTE technology and its adoption for TETRA.
LRTV Huawei Video Resource Center
Building a Better Dubai

10|16|14   |   2:06   |   (0) comments


Abdulla Ahmed Al Falasi is the director of commercial affairs, a telecommunications coordinator for the government of Dubai. Their areas of service span across multiple industries, including police, safety, shopping malls and more. In this video, Abdulla talks about his department's work with Huawei.
LRTV Huawei Video Resource Center
Huawei Lights Up Malaysia Partner Maju Nusa

10|16|14   |   1:59   |   (0) comments


Malaysia's Maju Nusa is an enterprise partner to Huawei in networking, route switches and telco equipment. At this year's Critical Communications World in Singapore, CTO Pushpender Singh talks about what Huawei's eLTE solutions mean to his company and for Malaysia.
LRTV Custom TV
Evolving From HFC to FTTH Networks

10|15|14   |   2:19   |   (0) comments


Cisco's Todd McCrum delves into the future of cable's HFC plant, examining how DOCSIS 3.1 and advanced video compression will extend its life and how the IP video transition will usher in GPON and EPON over FTTH.
Upcoming Live Events
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Is Health the Killer App for the IoT?
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/22/2014
Drones Hover Over the IoT Sector
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/23/2014
Analysts Warn of Major NFV Gaps
Carol Wilson, Editor-at-large, 10/22/2014
Roku Raises $25M, But for What?
Mari Silbey, Independent Technology Editor, 10/23/2014
AT&T: Merger Review Halt Won't Hurt Us
Alan Breznick, Cable/Video Practice Leader, 10/23/2014
Like Us on Facebook
Twitter Feed