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Nokia alliance taps new market

By Li Weitao (China Daily)
Updated: 2006-10-21 08:59

Finnish telecom firm Nokia formed a new joint venture in China on Friday to tap into the country's fledgling professional services market.

The joint venture, involving a total investment of 60 million yuan (US$7.59 million), will provide professional services such as telecom network design, planning, optimization, software development and managed services where mobile telecom equipment makers take over and run networks for operators.

ChinaComm International Ltd, which specializes in telecom services, will take a 51 per cent stake in the joint venture, which will be based in Changsha, the capital of Central China's Hunan Province. Nokia will hold the remaining 49 per cent stake.

ChinaComm, founded in 1987, has been providing telecom services to Chinese operators with a 400-strong engineering team.

The joint venture comes on the heels of a major network equipment deal signed between Nokia and China Mobile in September during Chinese Premier Wen Jiabao's visit to Finland.

Under the deal, China Mobile will buy mobile network gear worth 5.8 billion euros (US$7.3 billion) from Nokia during 2006.

But established global telecom equipment makers such as Ericsson, Alcatel and Nokia are facing challenges from local vendors such as Huawei Technologies, which are providing operators with more cost-effective network gear. Taking a punt on professional services, which are less competitive, could help lower risks in a network equipment market dogged by price wars.

"The professional services market promises huge potential. Nokia, which has major advantages and expertise in this market, expects to become the most preferred professional services provider for Chinese operators," said David Ho, president of Nokia (China) Investment Co Ltd.

Revenue generated from professional services currently accounts for more than 30 per cent of the global sales of the network business for Nokia, which is also the largest maker of mobile phones in the world.

On October 19, Nokia announced its third-quarter financial results. Its quarterly revenue hit 10.1 billion euros (US$12.7 billion). Sales at its network unit increased 16 per cent year-on-year to reach 1.8 billion euros (US$2.27 billion).

Chinese operators have been slow to embrace professional services in previous years for reasons such as regulatory hurdles. For instance, a foreign telecom equipment maker taking over part of a Chinese operator's network could raise national security concerns.

But transformation of operators' business models and technology advancement is driving demand for professional services in China. And they are also seeking to cut the operating costs of existing networks, or upgrade their current networks to the more advanced fixed-broadband access networks and 3G (third generation) mobile networks.