With CDMA subscribership growing in Africa, China and India, especially, and LTE gaining ground worldwide, Nokia Siemens Networks (NSN) has made an astute move in buying bankrupt Nortel Networks’ (NT) wireless assets. Analysts agree the Europe-headquartered joint venture of telecom equipment makers will add market share in North America and assume the No. 2 position, behind Alcatel-Lucent (ALU), as a provider of CDMA gear.
But NSN has its work cut out if it indeed ends up owning Nortel’s CDMA and LTE businesses. (There’s still a chance another company will submit a higher buyout price for the Nortel units; if that happens, bankruptcy law requires the assets to go to the highest bidder.) For one thing, NSN has no experience in CDMA, which is why it’s agreeing to take on at least 2,500 Nortel employees. It also must work to reassure existing Nortel customers that support and innovation will continue, and smoothly – product and employee integration could prove challenging. No matter what, the 3G/4G competitive landscape is changing.
Operators, What to Expect
When NSN late last week said it would buy most of Nortel’s wireless business for $650 million, it made sure to include reassuring soundbytes from North American service providers already using both companies’ products. Executives at Verizon Communications Inc. (VZ), Bell Canada, Sprint Nextel Corp. (S) and TELUS Corp. (TU) all lauded NSN as a strong, stable supplier that will carry on Nortel’s history of R&D. The inclusion of such formulaic praise is no accident – NSN has to show service providers and industry observers it has the people, technologies and strategies to successfully add CDMA to its portfolio, while still focusing on LTE development.
“I want to know that this isn’t just a move to get into North America, that this is a move to support [Nortel’s] products and not just whittle the market away,” said Peter Jarich, research director at Current Analysis. Operators, he added, should watch “to see how committed NSN is to CDMA.”
To do that, they’ll need to tune in to NSN’s announcements about how it plans to improve Nortel’s CDMA products, the roadmap it lays out for progress and, perhaps most of all, how it intends to combat rivals.
“I can’t say that the competitors were going easy on Nortel before but, really, how much did you have to compete against Nortel in bankruptcy?” Jarich said. However, now that Nortel’s CDMA and LTE assets are poised for a takeover by a strong, credible company, “you can imagine the level of competition” that will ensue. NSN needs to be prepared “not to sit back,” said Jarich.
One of the best ways NSN can show it’s serious about a Nortel acquisition, said Nadine Manjaro, mobile networks senior analyst at ABI Research, is to support existing 3G networks, all the while continuing LTE efforts.
“It will take a while to sort things out but I think [NSN] will definitely gain because the Nortel CDMA business was still very strong, even though it lost momentum because of the bankruptcy filing,” Manjaro said.
NSN will secure operators’ confidence quickly if it backs Nortel products and doesn’t lose momentum in the 4G field, analysts said.
