In an interview with Telecom Review, Samih Elhage, president of Mobile Networks, Nokia, talked about the company's progress through the years including its significant transformation in the industry.
What has been Nokia's scope of operations for the past years?
For the last four years, we have been focusing on mobile networks and services, and we have built a very strong technology leadership position. We wanted to create scale and scope; hence, the strategic logic to acquire Alcatel-Lucent. We gained technical control of Alcatel-Lucent in January, and have just completed a second opening of the public exchange offer, with Nokia owning around 91 percent of Alcatel-Lucent's shares.
Our objective was to create scale in mobile, but at the same time to expand the scope by widening the portfolio. The combined companies represented more than 26 billion Euros in net sales in 2015, with very decent operating profitability. We decided within the new Nokia to organize the company with four business groups plus Nokia technologies.
One of the groups is mobile networks, which will be our largest business with around 60,000 employees and number one in the market in LTE, which is the forward-looking technology for the years to come. Mobile networks is also starting to significantly shift resources towards 5G, consistent with our goal to be a leader in this area.
The second group is fixed networks, including copper-based and fiber-based solutions, and number one in BDSL in the market.
The third business group is responsible for IP routing and optical networks, which will make us number two on a global basis in IP routing. And our optical business is number one in Europe, Middle East and Africa region.
As for the fourth group, it's application and analytics, which is the set of a software capabilities that is required to improve the services end-to-end on the network infrastructure. This includes analytics, customer experience management, security and communication suites for the enterprise environment.
The fifth group is called Nokia technologies, with a focus on monetizing our IP assets, where we have more than 30,000 patent families, as well as the incubation of new technologies in media, healthcare, etc.
There are two lines of businesses that were divested by Nokia, which are BSS and microwave. With the acquisition of Alcatel-Lucent, will you go back to this business, especially now that Alcatel is active in these two lines?
Our strategy is to continue to focus on these businesses and to become number one or two in every single business we play in; it's an extremely important business strategy. So now the new Nokia includes a line for OSS, BSS and microwave, where we have a very good microwave business which is run by the vertical general manager under mobile networks business group. As for the BSS solution, it runs under the application and analytics business group.
It's worth mentioning that when we were in Nokia Siemens Networks (NSN) we decided to sell these businesses because they were very small. But the situation has changed significantly with the acquisition of Alcatel-Lucent.
Last year, it was mentioned that Nokia will return to dealing with devices, especially after the launch of a tablet under your brand name. Are there any plans to continue with this?
Nokia has a very strong brand. Actually, we didn't launch a tablet within Nokia, but we licensed the Nokia brand in cooperation with a particular player. Brand licensing is one of Nokia Technologies' focus areas. As for the rumors, we don't have anything new to say on that, I'm afraid.
On a global scale, what are your plans towards 5G?
First, we believe LTE will come in multiple phases to continue to improve the capabilities of networks. As you know, we now have LTE-Advanced; there will be LTE-Advanced Pro and then we will reach 5G. We believe there will be an evolution from LTE to 5G, and for this reason we are investing heavily in 5G. We have specific customers lined up to start to evolve with us in 5G, and this is really the initial manifestation of the demonstration of the capability of 5G which will start in 2017.
Is there any specific speed that you will reach in your lab testing?
With LTE we are currently seeing peak rates of approximately 1 gigabits per second (Gbps) possible in a commercial environment. This will go up to beyond 3 Gbps with LTE-Advanced Pro and then 5G will continue the trend; and, we have demonstrated 30 Gbps at Mobile World Congress.
On a regional scale, which region will be the largest to new Nokia?
In the new Nokia, we serve the top 15 operators around the globe. Based on the pro forma figures for the new organization, North America is the biggest region. As you know, Verizon, AT&T, Sprint and T-Mobile are four large operators where we have a very strong position. The second biggest region is Europe, then Asia-Pacific, China, Middle East and Africa and Latin America. Having said that, we have a very well-balanced distribution of the business around the globe.
Since the standardization of 5G has started early, which spectrum will you be using?
It depends on the customer that we are working with. We will use around 2.6 GHz and then it depends on the countries which would like to use different spectrum. As for the standardization, usually 3GPP will come first before productization of the technology, but the problem that we are facing now is that the cycle of technology is becoming shorter so we can't wait for this long period of standardization. We are definitely continuing to innovate while at the same time continuing to work on the standards.
What will the acquisition of Alcatel bring to the French speaking countries?
It's worth mentioning that from a technology perspective in the total market, we are bringing the full solutions for the operators whether in mobile network, broadband access, copper-based or fiber-based technology, optical or routing. We are bringing the full scope of technologies and networking capabilities to serve operators' needs.
Moreover, we have a very strong innovation capability. In 2015, we had around 4.5 billion Euros of R&D spend with 40,000 thousand R&D engineers spanning all these technologies. More importantly, within the R&D capability, we have what we call Nokia future works and technologies which drives innovation.
And now with this Alcatel combination we have Bell Labs which is a very well-known name for very advanced innovation. As for what we can bring to the operators in Africa with the technologies that we have, it's complete in the sense that we have fixed-based solutions and microwave.
Is it easy for Nokia to digest more people inside its culture, since you already had Motorola and now Alcatel?
We don't see it as an issue because we believe that every company brings a heritage of a capability that is strengthening Nokia. As an example, when we acquired Motorola, it brought with it significant quality processes that improved our quality in products and services as well as managing our customers.
Now with Alcatel we are bringing another set of capabilities, but what holds these different capabilities together is our culture. It is based on high performance culture by which you manage the mode of operations of the day to day business. Secondly, the behavior is what you need to have in order to achieve the business objectives. This behavior is driven by set of values which is based on respect, trust, achievement and renewal which is very important for us as a senior executive team and which we institute in our company, bringing it together.
When we started back in 2007 - and look where we are today - it's clear the company went through multiple evolutions. In the days when we did the transformation of Nokia Siemens Networks, we had to reduce the company from 73,000 people to 48,000, but in reality, we reduced the company by more than 48,000 people and we rehired more than 17,000 people. Having said that, looking at the diversity of perspective and roots of innovation, this creates strength for the company.
You had a bigger presence at the MWC 16. What are the significant innovations that you have you showcased?
We focused a lot on our innovation capability, so you have seen lots of specific cases in the different areas of cloud such as networking capabilities. We have shown lots of capabilities related to LTE-Advanced Pro, 5G, the internet of things, application and analytics, services and how we optimize the networks, core networking and specifically how we are evolving the monolithic network architecture to cloud-based, end-to-end architecture.
How are you accelerating the process towards a smart world?
First, let me tell you about our vision which is the programmable world. It is a high level view of things, but we believe in expanding the human possibilities of technologies. Our vision is really how we want to make the world a better place, and how we believe the world will become a better place driven by making everything connected. This is the center of what IoT is all about; you have these set of devices that are connected with the people.
On top of it will come the software and networking capabilities to bring meaning to these connections, and then on top of that you have set of applications and analytics in order to allow you to drive specific applications. The world is becoming smarter by enabling everything that gets connected to get connected, and giving the ability to create meanings to these connections. And this definitely brings a smart enterprise, city and home, all this to become part of the internet of things.
After joining Nokia, what kind of transformation has the company been through?
I started in Nokia Siemens Networks in 2012 as COO. Then, in 2013, I became COO and CFO until I became the president of mobile networks on January 8, 2016. So, the transformation of the company started back in 2012; we were able to strengthen the profitability by reinforcing our portfolio and market position on a global basis. Part of the transformation is the acquisition of Alcatel-Lucent which allowed us to get the scale and scope, and I was part of this team which drove this significant step.
Therefore, now as part of my new role I will continue to strengthen Nokia's market position and technology innovation, as well as lead the market in providing new capabilities to enable the new vision of the world, and providing the network capabilities to our customers that they can give to their customer or end users.
Where does Nokia stand from a digital transformation perspective?
For the last few years, we started to build a foundation for our digital transformation by significantly revamping our IP infrastructure and by the evolution of our IP infrastructure to the cloud. However, in addition to that, we need to have new set of networking capabilities to allow us to optimize the mode of operations on a daily basis to serve our customers, or to enable our employees to be more efficient in managing the business on a daily basis.
But at the same time, we are still at a point where we believe we have lots of things to do, and for this reason, we have a very aggressive strategy in this regard. In services, for instance, we have started to use digital robots to help us optimize our services capabilities. We have the foundation now; we have started to build, but we still have a lot to do in the digital business.
What are your plans for the Middle East region?
Middle East and Africa is a very important region for us because we have a very good growth potential across different areas of technology. So our strategy is to continue to increase growth in technologies that can allow us to expand the networking capabilities in LTE and LTE-Advanced Pro, as well as expanding broadband, IP routing capabilities and fiber optics network infrastructure. And on top of this, we will continue to create the overall servicing capabilities that are necessary to manage the networks in an effective way.