Network gear makers battle for fewer orders

By Tarmo Virki

HELSINKI, FINLAND: The world's mobile network gear makers are suffering from cost-cutting at top telecoms operators, who are increasingly clubbing together to share network equipment - and there is no let-up in sight.

Results of the three top telecoms equipment vendors were weaker than expected in the April-June quarter, due to clients' stagnating spending on equipment in key European markets, pushing vendors to cut prices.

The world's biggest operator by sales, Vodafone, has agreed to start sharing networks in Spain with Orange and in India with Bharti.

Some European operators are also considering rolling out their faster third-generation mobile networks more slowly than first planned and looking at possible consolidation.

"The underlying market is in an in-between stage," said Handelsbanken analyst Karri Rinta.

Alcatel-Lucent reported on Tuesday another underlying operating loss citing tough price pressure, after top vendor Ericsson reported weaker-than-expected profits earlier this month.

Nokia will report second-quarter results for Nokia Siemens Networks on Aug. 2, but most analysts say that based on numbers unveiled by Siemens last week, the venture made an operating loss in the quarter.

China's Huawei Technologies Co. Ltd, often seen as the most aggressive vendor in pricing, told Reuters last month some Western rivals are undercutting its prices.

Restructuring programmes at newly merged rivals Nokia Siemens Networks and Alcatel-Lucent have allowed Ericsson to steal market share by aggressively undercutting prices.

Alcatel-Lucent is in the midst of shedding 12,500 jobs, aiming to cut annual costs by 600 million euros ($822 million), while Nokia Siemens is about to cut 9,000 jobs as it tries to cut yearly costs by 1.5 billion euros.

"The new players are still waiting to be able to focus on their operations," said FIM Securities analyst Jussi Hyoty.

SIEMENS VENTURE TO WEIGH ON NOKIA

Alcatel of France and Lucent of the United States started operating as a combined business on Dec. 1 last year. NSN, the joint venture of Finland's Nokia's networking arm and Germany's Siemens carrier-related operations, started on April 1, 2007.

Siemens said NSN booked one-off charges of 905 million euros in the quarter related to restructuring.

Based on a 30 percent tax rate, the venture made a 155 million euro operating loss in the quarter, excluding one-off items, compared with 233 million euros profit forecast on average in a Reuters poll of 29 analysts.

The one-off charge was also far larger than the 206 million in the poll. 

Adjusting for the networks venture's performance, Nokia is expected to report earnings per share of 0.17 euros, polling firm Inquiry Financial said, with underlying earnings per share of 0.25 euros.

At the same time, Nokia's main business, making cellphones, is expected to show another set of good numbers for the quarter.

(Additional reporting by Kirstin Ridley in London)