Stockholm: Nokia Siemens Networks, trying to sustain nascent sales growth in the cut-throat phone-equipment industry, is targeting the United States market where Chinese rivals face political hurdles and rising data use entices carriers to spend.
The venture owned by Nokia and Siemens is forgoing less lucrative deals in Africa and the Middle East to focus on the US, Rajeev Suri, chief executive. said last week in an interview. In a shrinking global network-gear market, US demand is rising as AT& and other carriers add capacity.
Suri, into his fourth year as chief executive, is trying to find areas of strength for the venture that last month posted its first quarterly sales increase and profit since last year. Chinese rivals Huawei Technologies and ZTE, which have made gains globally, are struggling to win orders in the US as the country's officials advice against buying from them.
"The industry is a tough place," Suri said in Munich. "The US is certainly an opportunity so we'll be there." Equipment for faster networks allowing consumers to watch video and browse the Web on their mobile devices helped Espoo, Finland-based Nokia Siemens boost sales in the Asia Pacific region 29 per cent last quarter, driven by South Korea and Japan.
Sales in North America fell 6 per cent, a trend it is now trying to reverse by ramping up marketing spending and tapping the rising demand for data services.
Nokia Siemens vies with Huawei for the second spot in the global wireless-gear market behind Ericsson AB of Sweden.
While cheaper equipment has helped Huawei and ZTE gain market share in Europe and Asia, US carriers have so far been wary of awarding them large contracts.
The two companies, China's largest phone-equipment makers, provide opportunities for Chinese intelligence services to tamper with US telecommunications networks for spying, the US House of Representatives Intelligence Committee said in a report, advising against using their gear. China's commerce minister this month rejected the US concerns.
Nokia Siemens may also benefit from another rival's woes. Alcatel-Lucent, traditionally strong in the US because it was formed through a merger of Murray Hill, New Jersey-based Lucent Technologies and Alcatel, is weighing asset sales to cope with mounting losses that sent its stock to a 23-year low.
"The competitive environment within the mobile-equipment industry has changed in favour of NSN," said Sami Sarkamies, a Nordea Bank analyst in Helsinki. "It looks like the Chinese vendors will be kept out of the US, while NSN's improving profitability makes it a more compelling partner than Alcatel-Lucent, which is struggling."
Nokia Siemens won a deal in May to build a faster wireless network for Deutsche Telekom AG's US unit. Earlier this year, AT&T and Verizon Wireless awarded it smaller contracts, which Suri called 'beachheads' to potentially larger deals later.
AT&T, the second-largest US wireless carrier, plans to invest $14 billion in wireless and wireline improvements over the next three years. Nokia Siemens had global sales of €3.5 billion ($4.5 billion) last quarter.
The United States is one of the three mobile-phone markets where operators have changed their pricing strategies to better reflect users' data consumption rather than offering all-you-can-eat plans, making them more profitable, said Suri.
"Our strategy was to go for Korea, Japan and the US because that is where operators are monetising data," Suri said.
"It was about withdrawing from some markets in the Middle East and Africa where it's hard to make money and the rest of the world we would defend and not grow. What we saw in the third quarter was that the strategy is working."
Nokia shares fell 2 per cent to €2.70, headed for its first decline in six days. Siemens slipped 0.1 per cent to €78.23 in Frankfurt.
A recovery in the US would be another step toward Nokia and Siemens's goal of making the venture a more standalone business. Nokia Siemens's parents abandoned talks with private-equity companies in July 2011 after the buyout firms failed to come up with a compelling offer.
The parents said two months later Nokia Siemens would 'become a more independent entity'.
Since then, Suri has said he will cut 17,000 jobs, or about 23 per cent of the total, to make the company sustainably profitable.
Gross margin, or what's left of sales after production costs have been deducted, expanded to 32.2 per cent last quarter, beating market leader Ericsson's 30.4 per cent.
Suri has also sold units including the microwave-transport and fixed-line broadband-access businesses. In August, people with knowledge of the matter said the company was in advanced talks to sell a unit that helps phone operators manage their billing systems.
"Let's just focus on where we have scale, and the others — where we don't have scale and will never get it — let's just sell those businesses or put them into maintenance mode," Suri said. "The key is to be patient and play the long game."