Nokia Oyj (NOK1V), focusing on wireless equipment after the sale of its mobile-phone business, is aiming to accelerate market-share increases in the U.S., its networks chief said.
A contract last month from Sprint Corp., the third-largest U.S. carrier, shows Nokia’s strategy in the country is gaining traction, Rajeev Suri said in an interview. Nokia Solutions and Networks, the unit that will generate more than 90 percent of Nokia’s revenue after the disposal of the handset unit to Microsoft Corp., still trails Ericsson AB and Alcatel-Lucent SA in the world’s largest mobile-equipment market.
“It takes a long time to win in the U.S. -- now we have T-Mobile (TMUS:US), we have U.S. Cellular (USM:US) and now Sprint (S:US), so we are definitely making progress,” Suri, 46, said this week at NSN’s headquarters in Espoo, Finland. “A year ago we couldn’t anticipate that we would have gotten this break with Sprint.”
The U.S. is a crucial market for wireless-equipment makers, where carriers’ spending on building and servicing faster networks surpasses that of operators in regions such as Europe, Suri said. North America was the only region where NSN increased sales last quarter as it avoided less profitable deals elsewhere.
NSN, whose customers include the biggest wireless carriers such as Vodafone Group Plc, sells antennas and base stations that transmit calls and allow mobile-phone and tablet users to surf the Internet.
Suri said last year he would focus on the U.S., where Chinese rivals face a political roadblock and booming data use pushes carriers to invest in networks. When long-time Japanese customer SoftBank Corp. bought Sprint in July for $21.6 billion, Suri used that relationship to give Nokia a chance at the upcoming fourth-generation network upgrade.
As part of Sprint’s plan to spend $8 billion this year and next on capital expenses like network upgrades, Sprint selected Alcatel-Lucent (ALU), Samsung Electronics Co. and NSN to supply and manage the buildout. NSN displaced Ericsson, the bigger maker of mobile-network equipment, as one of Sprint’s vendor partners for the fourth-generation network upgrade.
While NSN’s revenue fell 26 percent last quarter, partly because of pulling out of less lucrative contracts, North America sales rose 5 percent to 299 million euros ($403 million). Ericsson’s revenue grew 3 percent in the region to 14.5 billion kronor ($2.17 billion) and Alcatel-Lucent’s revenue rose 14 percent to 1.66 billion euros.
Shares of Nokia have doubled this year, partly helped by improving prospects of the network division. The shares rose 0.6 percent to 5.95 euros at 2:28 p.m. in Helsinki, giving the company a market value of 22 billion euros.
Nokia agreed to sell its mobile-devices unit to Microsoft after struggling to regain relevance in smartphones following Apple Inc.’s iPhone introduction in 2007. Once the world’s largest smartphone maker with a market share topping 50 percent, Nokia now ranks outside the top five with about 3 percent share.
The company is set to receive 5.44 billion euros of cash from Microsoft, and may decide to use that to strengthen its network business. Nokia is considering a tie-up with Alcatel-Lucent’s wireless-equipment unit, a person familiar with the plan said in September.
Alcatel-Lucent is cutting 10,000 jobs to accelerate a cost-cut plan, and is planning to sell 1 billion euros worth of assets by 2015.
Suri declined to comment on a potential combination with Alcatel-Lucent. Weaker competitors are losing market share, leading to natural consolidation in the industry, he said.
“Market forces determine the outcome over time,” he said. “Market consolidation is happening all the time.”
The three biggest makers of radio equipment for wireless carriers, including NSN, control 78 percent of the market, Suri said. That figure is likely to grow, he said.
Nokia said in September it’s considering its strategy in a life after mobile phones and is looking for a new chief executive officer to help lead the slimmer company into the future.
With NSN set to be the core of Nokia’s business, Suri is a contender for the top job, said Mikko Ervasti, an analyst at Evli Bank in Helsinki. Suri has shown reorganization skills by cutting more than 20,000 jobs at NSN and bringing the business back to profit. Suri declined to comment on Nokia’s CEO search.
“With NSN making up such a large portion of Nokia’s business it would only make sense for Suri to be a strong candidate for the top job,” Ervasti said. “Suri helped oversee the massive turnaround at NSN and would be a solid pick for Nokia.”
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