The profitable Nokia

When its mobile handsets business was acquired by Microsoft last year, it was widely seen as the end of Nokia. But the Finnish company had an ace up its sleeve—the low-key (and loss making) telecom infrastructure business. Free of the handsets business, Nokia was able to focus on turning around Nokia Networks and allied businesses.

Eighteen months on, it looks like an impressive turnaround story (see chart). India-born president and CEO Rajeev Suri, calls the performance in the last two quarters the “strongest financials in the last five years”. Its current businesses—telecom infrastructure (Nokia Networks), HERE maps and navigation, and software (Advanced Technologies)—reported robust profits. Suri’s focus now is on becoming the market leader in mobile broadband. Nokia has already divested non-core assets in optical networking, IPTV, microwave transport, and fixed-line broadband access, among others.

Now, Suri is turning his attention to India—Nokia’s largest market after the U.S., China, and Japan—to help fuel growth. With 13 big telecom deals in the country, India accounts for 6% of its FY13 sales. Nokia sees the government’s Digital India project as further tailwind. The government’s initiative envisages Internet connectivity for all, riding on wireless devices. This means increased 3G and 4G coverage. Added to this, operator contracts for network equipment are coming up for renewal. Equipment also needs to be upgraded, as much of it is at least 15 years old.

Nokia is at the second position in telecom infrastructure; its only serious rival is market leader Ericsson. Besides, Nokia is banking on its legacy of relationships with telecom biggies such as Airtel, Vodafone, and Idea.

The India team plays a large role in operating, managing, and upgrading the networks of 400 operators in 86 countries—that’s roughly 200 million global subscribers. Some 20% of Nokia’s 55,000 global employees sit in India. “The talent we leverage here helps us do cutting-edge work for India and globally,” says Sandeep Girotra, vice president and head, Nokia Networks.

He adds that India has emerged as an innovation hub with key units like R&D and telecom equipment manufacturing in the country. “Our Chennai factory makes entire product lines, including 4G technologies. Our R&D centre in Bangalore has 4,000 researchers who’ve filed over 25 international patents,” says Girotra.

Nokia is also relying on its HERE technology and on Advanced Technologies to position itself as a major player in the connected car space, as well as the proposed smart cities projects.