After a six-year hiatus, Nokia is back in the network equipment business. The Finnish mobile phone maker on Wednesday officially took over the reins of its infrastructure joint venture Nokia Siemens Networks, buying out Siemens 50 percent stake for €1.7 billion (U.S. $2.2 billion).
Nokia plans to keep calling the company by its shorthand NSN, renaming the division Nokia Solutions and Networks (We’re just going to call it Nokia). It also looks as if Nokia will let the unit run with some independence. Rajeev Suri will remain CEO of the networks business, which will have its own executive board.
The reunion creates a bit of an enigma in the global mobile industry. While in the past it was common for the world’s biggest network equipment vendors and biggest mobile phone makers to be one and the same, they’ve become completely different classes of companies in the last several years. Ericsson, Motorola, Alcatel, Siemens have either sold or spun off their handset divisions.
The big exceptions are the Asian vendors, notably China’s Huawei and ZTE. Samsung also has an infrastructure division, though it’s still relatively small. Nokia has become the last of the complete-package wireless companies in the west, capable of selling you every link in the mobile chain from handset to base station to mobile packet core.
The networks group also looks to be the best performer of Nokia’s divisions, given its smartphone woes. The company has been profitable for the last five quarters thanks to a painful restructuring two years ago. Nokia still doesn’t rank in the top three when it comes to overall share of the telco networking market, but it does have a lot of momentum in one of today’s most important telecom technologies: LTE. NSN has won key 4G contracts all over the world. Its weak spot, however, remains the U.S. where a lot of big LTE networks are going up, but only one of which (T-Mobile) bears the Nokia logo.
Nokia’s network troubles also may not be over. Bloomberg reported that before Nokia took it over, NSN was considering 8,500 job cuts, reducing its workforce to 42,000. Nokia upper management will now have the final say on whether those layoffs go through, but Nokia seems most interested in using its fully owned network group as source of cash. According to Bloomberg’s sources, the network group is weighing a €500 million bond issue, the proceeds of which would go toward paying off Nokia’s dividend.