Nokia and Siemens announced the merger of their telecom network businesses in June, a move which could set them up as the No 3 player in the world's telecom infrastructure market. The 50-50 joint venture Nokia-Siemens Networks is expected to be operational by January 1, 2007 part of ongoing consolidation in the world's telecom market. Its estimated annual revenue of 15.8 billion euros will put Nokia-Siemens on a par with larger rivals Ericsson-Marconi and Alcatel-Lucent in the global telecom equipment market.

 

The two companies appointed the new entity's worldwide regional operation heads in August, including for China, which was listed as the only single country market for Nokia-Siemens Networks.

 

Simon Beresford-Wylie, executive vice-president and general manager of Nokia Networks and Chief Executive Officer Designate of Nokia-Siemens Networks, spoke to China Daily reporter Li Weitao last week about how the merger and pending regulatory approval is progressing. The questions (Q) and answers (A) follow.

 

Q: Nokia Networks has been focusing on mobile networks and we know Siemens is strong in the fixed-line business as well. So what is the role and value of fixed network technology for Nokia-Siemens Networks?

 

A: When we looked at the merger, originally the logic very much was based on convergence. In the last couple of years, it's becoming increasingly clear that fixed-mobile conversions is a major industry trend.

 

With the merger with Siemens, I think we have a beautifully balanced convergence portfolio.

 

On June 19 when we announced this I commented that 22 percent of our portfolio from a revenue perspective was based on fixed and 78 percent based on mobile.

 

Currently there are 2.4 to 2.5 billion mobile subscribers (globally). Our expectations are that by 2008 it will grow to 3 billion and it will touch 4 billion in 2010.

 

Other growth areas are very much in broadband, the fixed broadband, and around the convergent call. So fixed actually has, if you like, a nice dovetail from a growth point of view on broadband access and convergent call with the mobility business so we see a wonderful complementary here.

 

We feel great about the balance in our portfolio, because as Nokia-Siemens Networks we may start as No 3 (player) but we aspire to be No 1 and we think our portfolio gives us a great foundation to reach that goal.

 

Q: China will be the only single country market for Nokia-Siemens Networks. Why do you put China in such an important place, and what are your expectations for this new entity in the China market?

 

A: When we looked at our business in the structure, we settled on six business units and seven regions, and one region is China.

 

And why is China a region? Well, because it's a huge market. It's a fast-growing market. It's a market full of opportunities and it's big enough and different enough to warrant actually treating it as a region.

 

Q: What will be the major challenges for the merger?

 

A: I think the size is obviously very large and with size comes complexity. As we are two large businesses present in many countries and we have to bring these activities together, we have to bring our portfolio of products together and that brings complexity.

 

Also we also have to bring different cultures together as well.

 

There are also some very practical issues.

 

We have about 100 days to make Nokia-Siemens Networks go live. This new company will have around 60,000 employees, around 300 mobile customers, around 150 fixed customers.

 

So what that means is in January we need to make sure that we can pay 60,000 people, that we can receive orders from 450 customers, that we can deliver equipment and services to 450 customers, that we can issue invoices to 450 customers, that we can collect the receivables from 450 customers.

 

And actually that is a remarkably complex undertaking that we have to have in a very short amount of time ... but we will do it.

 

Q: Talking about cultures, some people say there are similarities because Siemens and Nokia are both European companies while others claim there is still a big difference as German and Finnish cultures are somewhat deep-rooted.

 

How will you address this challenge?

 

A: It's a very good question. Siemens is a 160-year-old company and Nokia is a 140-year-old company and when you are dealing with companies that have such long histories there are cultures that build up.

 

Every company, every country, has its own culture. But there are some strong similarities. If you look at the 60,000 people that will work in the company, two-thirds of them actually or thereabouts will work outside of Finland and Germany and many of us actually including myself come from either Finland or Germany, so both companies are outward-looking and global.

 

Both companies are very fine engineering companies. Both companies are very pragmatic, grounded, direct and open in their culture.

 

But we're different, because one has its roots in Finland and one has its roots in Germany. But in a globalizing world the diversity actually can be a competitive advantage. We don't live in a homogenous world.

 

I think as I look at the differences, the one that jumps most into mind is that at Nokia we are more informal while Siemens is more formal. But that is a difference, rather than a good or bad thing. But I don't see this as a major issue or challenge.

 

Q: To become the No 1 player, it seems there is still a way to go. How will you manage to reach this ambitious goal?

 

A: First of all, it's not a long way to go. The distance separating the top three isn't very great.

 

Secondly, I think one of the secret sources we have is our convergence portfolio.

 

Third, and I think the most important, there is a will, a desire to win that I can feel everywhere.

 

We have to keep the customer absolutely at the heart of our business. There are only 450 and they are like precious pearls.

 

So, if our employee base has that fighting spirit to win, and keeps the customer at the centre of reason of being, then we will get there and I know we will get there.

 

Q: Siemens has sold its mobile phone business and now seems to be also getting rid of its network business. Do you think there will be any change to the future shareholding structure at Nokia-Siemens Networks?

 

A: As the CEO designate of Nokia-Siemens Networks I stood between the CEOs of Nokia and Siemens on June 19 and I watched them and I heard them say that they love this business. And I really believe they meant that.

 

And I think there is no exit planned (for Siemens). They both love this business, and provided we, the leadership and the employees of this company, deliver what we have committed to I have no reason to believe that either will leave. I think they like it and they want to stay.

 

Q: In the first half of this year, China's telecom revenue growth has been slowing down, even lower than the GDP growth. What do you think of the trend?

 

A: I wouldn't comment specifically on the market. We sort of gave guidance on 2006 globally that we're expecting a moderate growth and that's all I can say.

 

Q: Nokia and Siemens have announced there will be a 10 to 15 percent lay-off. How is this going to impact China?

 

A: We expected to find 1.5 billion euros in synergy savings. And 90 percent of those (savings) would likely come within the first two years and the path of this is a 10 to 15 percent decrease in the headcount. And that's all now part of the planning process so I have no specific comments beyond that.

 

Q: We have seen a slew of mergers such as Alcatel-Lucent and Ericsson-Marconi. And recently Alcatel also announced it would buy Nortel Networks' 3G business. Do you believe the consolidation is going to continue as a global trend?

 

A: It's hard, difficult for me to call. I have to say that at the moment I'm now very focused on a couple of things. One is keeping our customers and two is making this integration work. There's been a lot of this (M&As) in the last few months and I think it's difficult to know what will happen in the future.

 

(China Daily September 12, 2006)