NSN/Motorola deal ends industry consolidation, predicts analyst

The acquisition by Nokia Siemens Networks (NSN) of Motorola's infrastructure assets is the likely end to any significant M&A activity. "The industry is probably the right size now, and any further consolidation would require a massive transaction," said Yankee group analyst Ken Rehbehn.

Commenting on the background to the purchase, NSN's CEO, Rajeev Suri, confessed that the deal was "all about the customers", adding that he expected the new company to be profitable. "I think operators will continue to invest in CDMA and GSM for several years. Naturally, they are declining businesses, but they remain profitable," he said.

Importantly, NSN will gain direct relationships with more than 50 operators, most notably with Verizon Wireless, China Mobile, KDDI and Vodafone.

Interestingly, Rehbehn believes that NSN will cultivate Motorola's WiMAX business even though LTE continues to gain adoption among operators worldwide. Motorola's existing relationship with US-based Clearwire for its growing WiMAX network is a lucrative one, he said. The Yankee analyst believes that NSN is sure to do everything it can to position Clearwire for a smooth transition to LTE from its existing infrastructure, if the operator decides to make that move.

The Motorola infrastructure unit generated 2009 revenues of US$3.7 billion, and the merger will see NSN absorb more than 7,500 Motorola staff along with R&D operations in China, Japan and the US. The US$1.2 billion deal is expected to complete by the end of 2010 - if not derailed by a counter bid from a Chinese vendor.

With the acquisition, NSN will move "in North America from number five to number three, and you can rest assured our ambitions do not end there," said Suri.

Separately, NSN announced it had been awarded a US$7 billion contract to build a mobile network for Harbinger Capital Partners, the New York-based hedge fund founded by Philip Falcone.

The new U.S. network, branded LightSquared, will involve NSN combining a LTE network with a satellite-based phone and data service that would then be offered as a wholesale-only service.

The new network, said Harbinger, would consist of 40,000 base stations with the aim of providing coverage to over 90 per cent of the US population by 2015. NSN said it had signed an eight-year contract with LightSquared to design, build and maintain the new network.

Falcone added that possible customers included pay-as-you-go operators such as Leap Wireless and Metro PCS, as well as T-Mobile USA.

For more on this story:
- read Business Week & Financial Times

Related stories:
NSN to expand Chinese R&D team by 50%
NSN scoops €600m T-Mobile/3UK network sharing deal
Alca-Lu and NSN mergers are fruitless, believes ZTE exec
NSN: 30 LTE trials underway

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