Dean Bubley: Siemens and Nokia

Dean Bubley posts about the Siemens (SI) and Nokia (NOK) deal at his Disruptive Wireless blog. He writes that "Three weeks ago I posted that Siemens' carrier business unit didn't quite have its story 100% right. I thought that some of the implicit assumptions around rollout of IMS, FMC, mobile TV and other areas were a little bit unrealistic....it looks like I wasn't alone in thinking that it needed a bit more weight. Today's announcement that it's merging its operator-facing group with Nokia Networks to create a €16bn / 60000-employee behemoth is hugely significant."

Here are some of his thoughts before the official teleconference:

• We've now seen Nokia/Siemens, Ericsson/Marconi, and Alcatel/Lucent mergers. Assuming that this trend of consolidation is going to continue, that leaves Nortel (NT), Cisco (CSCO), Motorola (MOT) and the various Asian manufacturers still standing. Difficult to suggest any obvious matchmaking "couples" there to be honest - I wonder if Ericsson's going to scoop up Nortel as well? Conceivably Cisco/Moto as well, although Cisco doesn't usually go in for mega-mergers.
• It's worth thinking about the underlying root causes of this process as well. Clearly, a lot of telecom infrastructure sales have been under severe price and margin pressure, because of the presence of companies like Huawei and ZTE. But I reckon part of the problem has also been (again) the creeping effect of IP-isation/IT-isation on the telecom industry. It's becoming increasingly difficult for the major equipment vendors (and their standards-body counterparts) to push "centrally-mandated" solutions such as IMS, and have them adopted rapidly. Such architectures are intended for normal "cookie-cutter" operator business models, in an era when either innovative bundling/marketing structures (think quadplay or MVNOs) or disaggregated connectivity/application (Internet etc) is become de riguer.
• As well as the network complexity, they are also having to contend with the device complexity as well, necessary in order to exploit the new network functionality. It's like a group of "mainframe" manufacturers, trying to deal with the fact that the "terminals" (same term, even) are now turning into PCs (or mobile computers, as Nokia would say). The analogy doesn't quite work, as obviously in the IT industry, the newly-emergent server vendors didn't have the equivalent of the telco firms' radio business.
• In fact, I'm wondering if consolidation would be better served with more horizontal specialisation. As we move towards more standardised hardware platforms in the telecom industry, is there any obvious justification for keeping both servers/networks and radio systems together in the same group? Maybe Nokia and Siemens should have gone further and created two new independent businesses - a radio/access company and a server/application one.