British mobile merger risk to Nokia Siemens

HELSINKI (Reuters) - Nokia Siemens Networks, the key equipment vendor to British operations of Deutsche Telekom and France Telecom, has most to lose in the merger of the two mobile networks, analysts said Tuesday.

An employee of Nokia Siemens Networks enters the office in Dubai June 6, 2007. REUTERS/Ahmed Jadallah

Deutsche Telekom and France Telecom unveiled Tuesday a plan to merge their British mobile units, looking to save 4 billion euros ($5.76 billion) and aiming to get regulatory approval by mid 2010 for the venture.

Analysts said both carriers were likely to hold off from any major investments until the venture starts.

“I don’t think there will be major changes in the short term, but the merger will decrease the cake to be shared,” said Pohjola analyst Hannu Rauhala.

Nokia Siemens has been the key network gear supplier for both vendors, while also operating Orange’s network.

“Nokia Siemens faces the biggest downside risk on the infrastructure side. In supplying both networks, NSN is exposed to almost all of the planned capex savings,” Nomura analyst Stuart Jeffrey said in a note.

Nokia Siemens Networks said it was too early to comment on possible impacts to its business.

“We believe we are in a good position to help the joint venture to succeed,” Ashish Chowdhary, incoming chief of Nokia Siemens’ services unit, told Reuters.

The telecoms equipment market has seen cut-throat competition for new business during the past few years, driven by Asian vendors, and the outlook remains tough.

Ericsson provides managed services to T-Mobile, while also supplying 2G network.

A spokesman for Ericsson declined to comment.

($1=.6950 Euro)

Reporting by Tarmo Virki, additional reporting by Simon Johnson in Stockholm; editing by Simon Jessop