Nokia Siemens to close services unit -sources

The logo of the telecommunications services company Nokia Siemens Networks is pictured on top their office in Berlin October 9, 2012.

FRANKFURT/HELSINKI (Reuters) - Nokia Siemens Networks' (NSN) services unit faces closure as an essential contract with Deutsche Telekom (DTEGn.DE) will not be extended, two people familiar with the matter said on Tuesday.

One person said the closure, effective en 2013 would be announced on Wednesday during a workers' meeting in Kassel.

NSN Services, which generates under 100 million euros in annual sales and employs about 1,000 people, ensures that calls and data are transmitted via overhead cable networks. Deutsche Telekom sold the unit to NSN five years ago.

At the time the two companies agreed on a 5-year 300 million euro services contract. The unit also counts Vodafone (VOD.L) as a customer.

The contract would not be extended, the person said.

German daily newspaper Sueddeutsche Zeitung first reported about the closure of the unit.

Verdi union representative Mike Doeding said that a meeting to update workers about next year's plans was scheduled for Wednesday, adding he had no idea about the message to be expected.

"If they are to close the unit it would be an outrage," Doeding said.

NSN declined to comment, while Deutsche Telekom referred to NSN for comment.

NSN, a 50-50 joint venture between Nokia Oyj (NOK1V.HE) and Siemens AG (SIEGn.DE), is cutting costs and plans to shed a quarter of its staff and sell product lines to focus on mobile broadband. NSN had 60,600 employees at the end of the third quarter.

The telecoms equipment market is going through rough times with stiff competition from Chinese peers Huawei HWT.UL and ZTE (000063.SZ) as the major telecoms operators postpone investments, faced with shrinking markets due to the weak economy.

France's Alcatel-Lucent (ALUA.PA) is also cutting costs.

On Monday, NSN said it was selling its optical fibre unit to Marlin Equity Partners, resulting in the transfer of up to 1,900 employees, mainly in Germany and Portugal.

(Reporting by Harro ten Wolde and Maria Sheahan in Frankfurt, Tarmo Virki and Terhi Kinnunen in Helsinki; Editing by Ludwig Burger and Louise Heavens)