UPDATE 3-Nokia Siemens: replaced 18,000 rival base stations

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By Tarmo Virki

LONDON, June 3 (Reuters) - Nokia Siemens Networks [NSN.UL] said it has replaced 18,000 base stations made by its rivals as telecom carriers vie for lower operational costs, in the latest sign of a fierce battle in the network equipment sector.

Nokia Siemens Networks on Tuesday said 22 operators in 15 countries had chosen its products to replace the installed base stations of other vendors, including all its large rivals, since the venture started operating in April 2007.

Analysts said that 18,000 base stations accounted for close to 10 percent of Nokia Siemens' sales volume in that period.

Nokia Siemens, Ericsson (ERICb.ST) and Alcatel-Lucent (ALUA.PA) are the leading players in the telecoms network market but have been increasingly challenged by Chinese vendors Huawei [HWT.UL] and ZTE (0763.HK) in the last few years.

With aggressive pricing Huawei took the No. 4 spot in the global telecom network gear market in the January-March quarter, bypassing Nortel Networks (NT.TO) and Motorola (MOT.N), according to research firm Dell'Oro.

Ericsson and Nokia Siemens saw their profits falling in the first quarter, while Alcatel-Lucent continued to report losses.

All three have forecast no market growth this year.

Nokia Siemens Networks' Chief Executive Simon Beresford-Wylie said the firm was focusing very closely on profitability and cash flow.

"No-one of us wants to work in a 0-5 percent (operating profit margin) industry," he said at a media event in London.

Ericsson's market share was 33 percent in January-March, almost unchanged from the previous quarter, but down from 35 percent a year earlier, while Nokia Siemens Networks market share was 24 percent, according to Dell'Oro.

Alcatel-Lucent had 16 percent of the market, 1 percent less than a year earlier.

Replacing other vendors' technology is not unusual in the competitive industry, but 18,000 base stations would be enough to create a 3G network in a large European country.

"This shows how tough the competitive situation is in the market. I don't think they could be making huge margins on these," said eQ Bank analyst Jari Honko.

Nokia Siemens said it had replaced significantly more of its rivals' base stations than the other way round.