LONDON European network suppliers may be struggling to find any silver lining
in the looming clouds of recession, but on Monday Kuwaiti mobile operator Zain
helped dispel fears of an investment slowdown with a contract worth nearly $1
billion for Nokia Siemens Networks.
Zain has awarded a $935 million contract to Nokia (nyse: NOK news people )
and Siemens (nyse: SI news people ) joint venture to roll out a mobile
network in Saudi Arabia from scratch. The contract includes five years of
maintenance services and establishes Nokia Siemens Networks as the sole supplier
for Zains new nextgeneration network.
Shares in Nokia slipped 9 euro cents (13 cents), or 0.4%, to 24.58 euros
($36.16), during midday trading in Helsinki. Siemens ticked up 5 euro cents (7
cents), or 0.1%, to 103.38 euros ($152.08), in Frankfurt. Both stocks
outperformed the Dow Jones Euro Stoxx technology sector, which fell 1.5% on
prolonged fears of a recession in the United States.
Shares in Zain rose 0.06 Kuwaiti dinars (22 cents), or 1.6%, to 3.94 dinars
($14.43), in Kuwait. The Kuwaitbased operator won the third mobile license
issued by Saudi Arabia last July, which cost $6.1 billion, and plans to begin
operations in the kingdom during the first half of 2008.
European network suppliers including Ericsson (nasdaq: ERIC news people )
and AlcatelLucent (nyse: ALU news people ) had a rough ride in 2007, as
profit margins declined in the face of heavy price competition and slower sales
of network upgrades and expansions. With the wider economic slowdown in 2008
pointing to even less investment from clients like AT&T (nyse: T news people
) and Vodafone (nyse: VOD news people ), could more reliable spenders in the
Middle East and other highgrowth markets improve the sectors fortunes?
"I dont think the Middle East market as such will be larger in volume terms
this year rather than last year," said Martin Nilsson, analyst with Carnegie.
"It will be pretty flat."
Nilsson argued that nextgeneration 3G network sales would grow, while 2Gwhich
accounted for 85% of saleswould decline. Although emerging markets are seen as
less saturated than their Western counterparts, Nilsson said that the Middle
East was seeing more penetration than before.
Zain changed its brand name from MTC last September, and has a market
capitalization of over $26 billion. It is in 22 countries across the Middle East
and Africa, and boasts 36.5 million customers.
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