Three weeks ago I posted that Siemens' carrier business unit didn't quite have its story 100% right. I thought that some of the implicit assumptions around rollout of IMS, FMC, mobile TV and other areas were a little bit unrealistic.
...it looks like I wasn't alone in thinking that it needed a bit more weight. Today's announcement that it's merging its operator-facing group with Nokia Networks to create a €16bn / 60000-employee behemoth is hugely significant. There's a conference call later today, so I should have a few extra details.
But a couple of thoughts upfront:
We've now seen Nokia/Siemens, Ericsson/Marconi, and Alcatel/Lucent mergers. Assuming that this trend of consolidation is going to continue, that leaves Nortel, Cisco, Motorola and the various Asian manufacturers still standing. Difficult to suggest any obvious matchmaking "couples" there to be honest - I wonder if Ericsson's going to scoop up Nortel as well? Conceivably Cisco/Moto as well, although Cisco doesn't usually go in for mega-mergers.
It's worth thinking about the underlying root causes of this process as well. Clearly, a lot of telecom infrastructure sales have been under severe price and margin pressure, because of the presence of companies like Huawei and ZTE. But I reckon part of the problem has also been (again) the creeping effect of IP-isation/IT-isation on the telecom industry. It's becoming increasingly difficult for the major equipment vendors (and their standards-body counterparts) to push "centrally-mandated" solutions such as IMS, and have them adopted rapidly. Such architectures are intended for normal "cookie-cutter" operator business models, in an era when either innovative bundling/marketing structures (think quadplay or MVNOs) or disaggregated connectivity/application (Internet etc) is become de riguer.
As well as the network complexity, they are also having to contend with the device complexity as well, necessary in order to exploit the new network functionality. It's like a group of "mainframe" manufacturers, trying to deal with the fact that the "terminals" (same term, even) are now turning into PCs (or mobile computers, as Nokia would say). The analogy doesn't quite work, as obviously in the IT industry, the newly-emergent server vendors didn't have the equivalent of the telco firms' radio business.
In fact, I'm wondering if consolidation would be better served with more horizontal specialisation. As we move towards more standardised hardware platforms in the telecom industry, is there any obvious justification for keeping both servers/networks and radio systems together in the same group? Maybe Nokia and Siemens should have gone further and created two new independent businesses - a radio/access company and a server/application one.
(Rather lost in the noise today is another announcement from Nokia, that it is launching a WCDMA picocell. It's not obvious whether this is entirely own-brand, or whether it is OEM'd in a similar fashion to its 2G picocell from RadioFrame. Perhaps better-known is Siemens' 2G picocell from ip.access . It will be interesting to see how all these products are aligned, not least because I reckon a dual-band 2G/3G picocell is preferable to a 3G-only one. Nokia has also had nothing much to say about femtocells.)
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