March 5, 2016
Hong Kong CSL Ltd. , a mobile operator that is an old customer of Nokia Siemens Networks (NSN), is reportedly planning to give its cellular network upgrade contract to ZTE Corp. rather than its incumbent supplier.
NSN are expected to take this announcement doubly hard as they have not only lost the upgrade deal, but will have its 2G and 3G gear replaced by ZTE equipment.
CSL have maintained that they “have a continuing relationship with NSN,” while NSN have refused to comment.
This decision from CSL serves as another blow to incumbent cellular network suppliers such as NSN and Ericsson AB as the point that market conditions are getting tougher is rammed home.
The market shares of companies such as ZTE and its Chinese rival Huawei Technologies Co. Ltd. continue to grow, which contributes to the downward pressure on prices and margins of others.
The relationship between NSN and Hong Kong based CSL extends back to 1991, when the operator gave the GSM core and radio access network contract to Nokia’s networks division, and ten years later CSL awarded Nokia a 3G network contract.
It now seems that NSN has had its time, and there is speculation that it is the vendor’s reluctance to engage in unprofitable customer relationships that may have influenced the operator’s decision.
For instance, NSN recently indicated that it’s not prepared to do business when the price is so low its margins could be compromised following their backing out of a GSM contract with Bharat Sanchar Nigam Ltd. (BSNL) in India that was worth about $875 million, due to the unfavorable financial terms of the deal despite its many benefits.