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. Last Updated: 07/27/2016

Nokia Battles Equipment Rivals

HELSINKI, Finland -- The world's biggest mobile handset maker may be cutting 10 percent of its staff due to the global downturn in demand, but in neighboring Russia, business is booming. Especially when it comes to network equipment.

Underlying every cellular phone call is an entire nervous system of switches and base stations and terminals. And among suppliers for this market, Finland's Nokia trails its rivals Alcatel of France, Sweden's Ericsson and Siemens of Germany.

Market research firm Sotovik estimates that those three together control some 67 percent of the Russian mobile infrastructure market.

Nokia nonetheless has kept busy.

No. 3 mobile operator Megafon gave four contracts to Nokia last year to supply multimedia messaging solutions in Moscow and St. Petersburg. Megafon also bought the Finnish company's general packet radio service as well as a WAP gateway for its network in St. Petersburg.

Megafon is 26 percent owned by the Finnish company Sonera.

Announcing the appointment of Jonathan Sparrow as Nokia Networks' general director in Russia earlier this week, the company reiterated its determination to expand its presence here.

Sparrow's appointment "underlines how important Nokia considers the Russian market," Nokia Networks vice president Bosco Novak said. "We are significantly increasing our efforts to be able to capitalize on favorable business opportunities in this key market."

France's Alcatel leads the market. Its equipment was used to build 15 GSM networks in Russia, the company said.

"Russia is certainly a very promising market for mobile equipment vendors, given the active regional expansion by the federal operators -- Mobile TeleSystems, Vimpelcom and Megafon," said Alexei Boiko, marketing director at Sotovik.

Boiko said Ericsson and Siemens pulled in strong performances last year, but Alcatel "will hardly give up its leadership without a fight."

Alcatel's domestic sales director Mikhail Zaskalet said the company has targeted its business strategy toward serving Russian mobile operators.

"Since Russia's two largest cellular companies are among the top five Eastern Europe operators, and their growth rates are impressive, Alcatel certainly pays priority attention to the region," he said.

Ericsson also considers Russia a key market for growth.

Eddie Ahman, president of Ericsson in Russia, said this country accounts for the 10th-highest sales volume on a list of the 140 countries it serves. And unlike other countries, "there are no indicators of decline or slowdown in Russia," he said. "On the contrary, it is continuously growing."

"This market has huge potential," said Rudi Lamprecht, a board member at Siemens AG and chairman of the board at Siemens Information and Communication Mobile Group. "[Russia's] big population and huge territory give us big opportunities for our business."

Russia's low penetration level relative to other countries -- about 15 percent nationwide -- means that "we see big prospects here," he said.

Infrastructure vendors' latest innovations, GPRS and MMS services -- the so-called 2.5 generation -- are in use here, but it is the more basic, second-generation services that provide the backbone of the domestic market.

These "2G" networks offer services like voice and short messaging and canvas the regions. Subscribers in more metropolitan markets seek more advanced wireless services, and cellular operators say they will be ready to offer advanced wireless services as soon as demand for them reaches a critical mass.

"We expect active introduction of 2.5 generation services in the next couple of years nationwide," said Sotovik's Boiko.

Zaskalet, of Alcatel, said three-quarters of operators' current infrastructure is second-generation technology. And the market will continue to be dominated by 2G switches and base stations "for the next three to four years," he said.

This is because "the period of extensive growth in Russia is not over yet," he said, and the country's market has yet to reach full maturity.

"Since mid-2002, we have seen an explosive increase in demand for intellectual platforms, which offer solutions for prepaid services and others. This is the next step in the evolution toward new-generation standards and building competitive networks," Zaskalet said.

Ericsson's Ahman said 2.5G technology will become common in Russia only after "the creation of attractive and useful applications for end-users."