Nokia wants operators to challenge it, as the company embarks on a two-pronged strategy to deliver growth amid a flat market over the next 12 months.
Earlier this month, Nokia CEO Rajiv Suri (pictured, above) told investors at its Capital Markets Day event that it planned to grow revenues at its Networks business “slightly faster than the market” and deliver year-on-year sales growth at its Here and Technologies businesses.
Holding court at the company’s office in the City of London this week, Kathrin Buvac, VP of Corporate Strategy at Nokia Networks, told European Communications that her strategic plan was focused on finding pockets on growth in existing markets – notably LTE, small cells and security – as well as new opportunities – think cloud and IoT – in adjacent markets.
On the face of it, it is a strategy that doesn’t sound too exciting, but Nokia could do with some stability and consistent growth for a while.
Since the demise of its Symbian and its world-leading devices business, the company has been through some painful cost-cutting – almost 25,000 staff – and a divestiture to Microsoft that finally got clearance earlier this year.
Now, amid a surprise return to the devices business, it is keen to convince the world that its three uneven businesses can gel and deliver growth.
The obvious place to start is Networks, which returns almost ninety percent of company revenues.
According to the latest data from research house Dell’Oro, Nokia retains its number three spot behind Ericsson and Huawei in the global wireless packet core market.
Buvac says the company gained six percent market share in LTE specifically during Q3, taking it to 20 percent. She describes the performance as “very strong” and “a massive improvement”.
But keeping that sort of momentum up will be hard. The big growth market of China offers scraps, says Buvac: “A certain share is allocated to the Chinese vendors and then the rest is left for everyone else. We have the best share we could have got.”
The US is slowing down and although Nokia has captured Sprint’s business it will have to pull off something really spectacular to get Verizon or AT&T.
Says Buvac: “People still say we are sub-scale in the US but we’re not a nobody. We still want to break through.”
Perhaps the best opportunities lie in India and Lat-Am. India is starting to see momentum, but Buvac says it offers limited growth opportunities.
Meanwhile, although Buvac (pictured, below) says she is pleasantly surprised by how quickly operators in South America are rolling out LTE, she is concerned about “a bit of unrest” on the operator side caused by potential consolidation.
Which brings us neatly to Europe. Buvac is less convincing when pressed on whether consolidation would be harmful to Nokia’s prospects. “Network sharing is not necessarily bad for us and operators are using the money to reinvest in improving quality,” she claims.
A bigger problem could be what she sees as slow LTE progress. She says: “Everyone thought Vodafone's Project Spring announcement would be the big accelerator [for LTE rollout] but it hasn’t happened. The floodgates have not opened...LTE is still very small in Europe overall.”
Somewhat surprisingly, she claims there is not “massive demand from a user experience” for 4G.
Certainly compared to Asia, where Nokia is the market leader and consumer uptake of new services is much more pronounced, she has a point.
Nokia would like to benefit from the relationships it has with Docomo and Softbank in Japan. Buvac describes the former as the most advanced operator in the world and says both provide a test-bed for the rest of the industry.
“They challenge us to provide new solutions,” Buvac says.
But even here, Nokia feels stymied. Referring to standardisation, Buvac laments: “It’s harsh, but innovation just gets you parity [in the end].”
It is this which is forcing Nokia to look at how it can develop Here and Technologies arms.
The two units are minnows next to the Networks leviathan but there is some exciting stuff there.
While Buvac has already expanded on brand licensing at Technologies, Here is “superbly strong” in mapping, she says – a fact backed up number of car manufacturers that carry its technology.
A key goal for the company is to bring Here and Networks together.
For example, it would like to develop a proof of concept it has demonstrated with T-Mobile US. In September, Nokia upgraded a live T-Mobile US base station with its Liquid Apps solution to alert drivers to real-time road hazards.
Nokia said the PoC transformed a regular LTE base station into a roadside unit for vehicle-to-infrastructure communications.
But with so many others already active in this space for some time, isn’t Nokia a bit late?
Buvac’s answer is emphatic: “No. If any of our competitors in the IoT space are saying they have monetised that much this year I would not find that credible.”
She adds Nokia would be “foolish” if it were not to try and use the competitive advantage that Here’s relationship with its car manufacturer customers provides: “It’s a vast opportunity.”
But she admits to an Achilles heel: “The one thing we don’t have is a platform in the IoT space.”
Overall, however, Buvac says Nokia is up for the battle: “If you tell me there is no more growth to be had in this industry then I think you have made a false assumption.
“I ask operators to challenge us by finding smart, innovative ways to help them to overcome issues such as spectrum availability and regulatory issues. We’ll provide them with what they need.”
Gartner analyst Sylvain Fabre tells European Communications that while Nokia is certainly more bullish than in the past, they will find organic growth “very tough” to achieve in Networks.
He says: “ [CEO] Rajeev Suri has hinted at careful acquisitions but we need to have more information about their plans.”
On brand licensing at Technologies, Fabre says that maintaining quality will be key, while he warns moving into new verticals will more than likely provide a “complementary” source of revenue rather than being a “massive opportunity” on its own.
Buvac is certain that the company’s old guard can deliver for the new Nokia: “Those of us who came in from NSN know we can execute a hard strategy, that's what we're known for.”
Have you registered to attend our SDN/NFV & Managed Services day on 3 December? Click here to see Orange, BT, Juniper Networks, Ciena, Amdocs and more