NSN: Infrastructure market to stay flat

Nokia’s earnings results led to a big sigh of relief in the industry as it reported numbers in line with expectations and projected a rosy forecast for the rest of 2008 for its handset business. But the results for its infrastructure arm, jointly owned with Siemens, were mixed.

Nokia Siemens Networks said it expects the mobile and fixed infrastructure markets to be flat in 2008 compared to 2007, and it expects its own market share to remain flat, which may offset the revenue gains it made in the second quarter. NSN reported revenues of EUR 4.07 billion (US $6.45 billion), up 18.3% year-over-year. Those gains would have been even greater if it weren’t for fluctuation of the US dollar and other currencies. At a constant currency basis, NSN said its revenues would have increased 26%.

However, NSN still reported an operating loss of EUR 47 billion, and it continues to face restructuring costs from its merger with Siemens networks division in 2007. It incurred EUR 201 million due to restructuring charges and other one-time items, though it is still far lower than the EUR 905 million it doled out in the second quarter of 2007, when the joint venture was formed. Price pressures did show some signs of easing up, though, as its operating margins, excluding one-time items, rose to 6.5% from the negative margins it reported the year before.

Most of NSN’s growth came from the developing markets: the Middle East and Africa, China both saw sales boosts of over 40%, while revenue from Latin America increased 88%. North America, already NSN’s smallest region, saw revenue decline 3.7% to EUR 158 million. Much of that can be attributed to the dollar’s falling value against the euro, but NSN also holds two significant contracts in the US, which should be boosting its sales.

NSN, along with Ericsson, is building T-Mobile’s nationwide 3G network on the advanced wireless service band, the first market of which launched in May. NSN is also building Sprint’s WiMAX network in Texas, but little public activity has come from that contract since it was announced. Sprint is set to launch Samsung-built networks in Baltimore and Washington, DC, and Motorola-built networks in Chicago by the end of the year, but it has set no date for the Texas launches. In addition, both Motorola and Samsung have gotten their 2.5 GHz base stations certified by the WiMAX Forum, while NSN has not. Sprint and Clearwire plan to form a joint venture this year that will combine their WiMAX assets, and neither company is expected to launch any more commercial mobile WiMAX networks until the deal closes.