Q & A: Nokia Siemens On its $7B LightSquared Deal
After last summer's blow-out with its failed bid for Nortel's CDMA/LTE assets, Nokia Siemens Networks has come back with a vengeance to make its stake in the North American market.
In addition to its acquisition of Motorola's networks business, Nokia Siemens has landed a $7 billion deal to build out a hybrid satellite-terrestrial LTE network for New York-based hedge fund Harbinger Capital Partners' venture, LightSquared.
The network has not been without controversy. AT&T and Verizon Wireless lobbied against the FCC's terms for the deal between Harbinger and Skyterra. Harbinger has faced relentless scrutiny over its ability to fund the venture, and the satellite spectrum it was to operate on only recently gained FCC approval for terrestrial use. In addition, LightSquared must reach aggressive deployment deadlines set by regulators.
Nokia Siemens' deal with LightSquared to deploy and manage its network has landed itself in the middle of some of these issues, particularly around deployment plans and financing. Wireless Week spoke with Susan Schramm, Nokia Siemens' head of marketing and corporate affairs for North America, about the construction and financing of the LightSquared network. Below is an edited transcript of the discussion.
Wireless Week: Why is the LightSquared deal important to Nokia Siemens Networks?
Susan Schramm: It's clearly a validation of Nokia Siemens Networks as a partner in North America. It enables us to leverage our global experience in LTE... and clarifies that we are more than just a technology company. The reason we were selected was because we had an end-to-end ability to provide and manage the network. [The LightSquared contract] is not only build and transfer, but build, operate and manage.
Our customers in North America received this news very positively, because back to back with the Motorola news it was a huge statement of our intention to be here and have the scale and end-to-end commitment to provide what they need.
WW: How many people are you devoting to this project given the aggressive timelines LightSquared has to meet?
Schramm: We're not [taking] a traditional approach. We have a global NOC [network operations center] in India that allows us to quickly ramp just as we do for people all over the world. We also have a NOC in the United States, so some level of our headcount is already in place because the tools and processes it would take to start from scratch are already established. It's several hundred people right now, but I don't think we've announced the actual numbers of people [we're devoting to the LightSquared buildout]. It's definitely going to be an opportunity for growth as we move from city to city and do those builds, but we'll also be leveraging some of the resources we already have.
WW: LightSquared signed you up for a $7 billion contract, but it doesn't have a whole lot of revenue coming in right now and hasn't even raised $7 billion. What contingencies do you have in place so that you get paid if LightSquared can't raise the $7 billion it promised you in the contract?
Schramm: We strongly believe that their business model is logical. We've learned from the fixed world of wholesale with Level 3 and others that this can work, it just needs to be done as well on the wireless side. Obviously, the terms of our agreement with them is confidential so I won't go into a lot of details, but you can understand that together we're looking at risk in an appropriate way.
Our focus is to help them get what they need to build out their network and meet their commitments to the FCC. One of the reasons LightSquared wanted to announce the contract so urgently was because they're talking to a lot of customers every day and wanted to be able to give them a sense of confidence that they could execute. I think our relationship with them is mapping to the kind of commitments they need to make to their customers.
WW: There was a rumor that Nokia Siemens is raising money for an initial public offering. Are you commenting on that?
Schramm: Clearly we do not comment on rumor or speculation. You'll need to talk to our parent companies on anything to do with their investments. We're really focused on our customers and growth, as evident from our recent announcements. This is a company that's growing, not only in terms of supply but demand from customers that want our offerings. That's where Nokia Siemens is focused.
WW: There's a lot of competition in the infrastructure market but a few key contracts or an acquisition can really turn the tide for a company. Do you feel that things have changed this summer for Nokia Siemens?
Schramm: In one week, we made enough noise that people know we're here... but this isn't our entire growth strategy. We have a whole optical business, mobile backhaul, integration services business, application integration services, IP TV and more. We're seizing this opportunity to let people know we're going to grow by helping carriers create value for their customers. That's our whole mission in life. We're focused on helping them create a unique differentiation value. That's what I'm hoping people take away from this at the end of the day. We're on a train, we're going somewhere and we're growing.