January 31, 2012 / 1:45 PM / 8 years ago

UPDATE 2-Nokia Siemens job cuts hit Germany, Finland

* To cut 2,900, or 32 pct, of jobs in Germany

* To cut 1,200 jobs in Finland

* First European vendor to slash costs significantly

* Analysts say others have to follow (Adds union, analyst comments)

By Tarmo Virki and Jens Hack

Jan 31 (Reuters) - Nokia Siemens Networks, the world’s No.2 maker of mobile telecoms network equipment, plans to cut 4,100 jobs in its home countries of Finland and Germany as part of a cost-cutting drive aimed at coping with competition and weak demand.

Nokia Siemens, which said in November it would axe 17,000 jobs or almost a quarter of its workforce to help save about 1 billion euros ($1.3 billion), said on Tuesday it was talking to unions about 2,900 job losses in Germany and 1,200 in Finland.

The venture has struggled to make a profit since it was formed in 2007 by Nokia and Siemens in the face of aggressive pricing from industry leader Ericsson and, increasingly, Chinese entrants.

Faltering economic growth has also forced telecoms companies to cut spending. Last week Ericsson stunned markets with a 50 percent drop in quarterly profit, missing even the gloomiest forecasts, and warned telecoms operators were likely to remain cautious on spending in the months ahead.

Analysts said all European vendors will have to make big cost cuts and look at consolidating to stay in business.

“The cost of a Swedish, German or Finish engineer is an order of magnitude higher than a Chinese one - this makes the threat from a rampant competitor like Huawei a very daunting prospect,” said Ben Wood, head of research at CCS Insight.

John Strand, founder of Danish mobile consultancy Strand Consult, agreed, adding: “This industry needs consolidation.”

The 2,900 cuts in Germany equate to roughly every third Nokia Siemens’ job in the country, causing uproar among unions.

“We will fight with the employees against this job cull. Our target is to save as many jobs as possible with a collective labour agreement and to avoid the close-down of Munich plant,” said union official Michael Leppel.

The Finnish economics ministry said the timing of job cuts was problematic as Nokia itself is in the midst cutting thousands of jobs.

“For the Finnish economy the situation is challenging,” it said in a statement.

The telecoms equipment industry saw a recovery in 2010-2011, but in late 2011 demand slumped again as operators put a lid on spending, hitting earnings of all top vendors, including Ericsson and Alcatel-Lucent.

Alcatel-Lucent, which is in the similar position to Nokia Siemens, has ruled out large job cuts. ($1 = 0.7625 euros) (Reporting By Tarmo Virki, Jens Hack and Irene Preisinger; Editing by Erica Billingham and Mark Potter)

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