Nokia Siemens networks is to lose 17,000 out of its 74,000 staff as the company restructures in an attempt to cut costs by €1 billion a year.
The company said it will focus on mobile broadband and services but did not immediately define which areas of activity would be cut.
In a prepared statement CEO Rajeev Suri said: “We believe that the future of our industry is in mobile broadband and services and we aim to be an undisputed leader in these areas. At the same time, we need to take the necessary steps to maintain long term competitiveness and improve profitability in a challenging telecommunications market.”
The workforce will be cut by 17,000 by the end of 2013, said the company, adding that these will be achieved by measures that “are expected to include elimination of the company’s matrix organizational structure, site consolidation, transfer of activities to global delivery centres, consolidation of certain central functions, cost synergies from the integration of Motorola’s wireless assets, efficiencies in service operations and company-wide process simplification”.
In a conference call with journalists Suri identified NSN’s wireline operations as “non-core”, though he included optical fibre-based mobile backhaul in the mobile broadband category which would be kept in the company. “A lot of the fixed businesses will be non-core,” he added.
Suri said that NSN “returned to growth” two years ago and since then had “five consecutive quarters of year-on-year growth” as well as “seven of the last eight quarters of non-IFRS operational profit”. [IFRS stands for International Financial Reporting Standards.] “Though we are far from satisfied,” he added.
He noted that the industry has passed the era of fast growth that it experienced at the beginning of the century. “We expect only modest growth across the industry,” he said.
As a consequence, NSN wants to focus on mobile broadband and services, including specifically customer experience management and managed services. Those are the growth areas, and he claimed that NSN is number one or two in the sectors on which it is focusing. “Unless you are number one or two it would be extremely difficult to support the required investment.”
He said that NSN will be involved in “end to end mobile network infrastructure and services, with a particular emphasis on broadband”, but he implicitly criticised rival companies that have not focused. “We will be the first company to make these hard choices,” he said. “The industry structure does not allow end to end players to be successful.”
Areas outside the core will be “divested or managed for value”, which implied keeping them going with no further research and development, but he was careful to give almost no detail about them. “I can’t be more specific. We have been very careful to select what we do and what we don’t do.”
He cited a number of times NSN’s deal announced in early November to sell its microwave transport business to Canadian company DragonWave for €10 million in cash and €5 million in shares. That deal will see 360 NSN staff, mainly in Milan and Shanghai, move to DragonWave, and NSN will be a channel for the products.
Asked by Global Telecoms Business whether NSN is actively talking to other companies about sales of activities, Suri said simply: “Yes,” but gave no further information, such as how fast the businesses would be sold. “I can’t outline the timeframe. We’ll start to do it on a case by case basis.”
For the core business, “we are not backing away from our commitment to R&D and innovation”, said Suri. “We expect investment in mobile broadband to increase in the coming years.”
He refused to give details of where the 17,000 job losses will take place “until we reach country-level plans”, but said that “NSN is a European company” and that he expected that to “continue in the coming years”.
Suri said that the measures had the support of NSN’s two shareholders, Nokia and Siemens, which put €1 billion funding into the company at the end of September 2011, after the company had dropped plans to seek funding from private equity investors.
In February 2011 Suri confirmed to Global Telecoms Business in an interview conducted at Mobile World Congress that NSN was looking for private equity investment — the first time the much-rumoured move had received official acknowledgement. However, by July the search had been abandoned. “Our parents decided to put in €1 billion because they very much liked our new strategy,” said Suri in response to a question from GTB at his conference call when the cuts were announced.  GTB

Further reading:
NSN sells microwave transport for €15m 04 Nov 2011
Nokia and Siemens pump €1bn into NSN 29 Sep 2011
NSN 'needs further €1bn' for restructuring 18 Aug 2011
Nokia and Siemens drop private equity search 13 Jul 2011
NSN 'unsuccessful' in deal for equity stake 27 Jun 2011
NSN buys Motorola operation for $975m 03 May 2011