Network equipment makers bet on services growth

By Tarmo Virki

BARCELONA (Reuters) - Top mobile telecoms equipment makers are betting on growth in the $71 billion services market as cut-throat competition in hardware has hit profits and stalled the sector.

Analysts expect services -- which includes installing or maintaining networks, consultancy or operating whole networks -- to grow more than 5 percent a year in the mid-term, versus an equipment market set to fall further.

"The overall value of network business is destined to shrink in 2G and 3G," said Margaret Rice-Jones, chief executive of network consultancy Aircom.

Telecoms operators have started to look at outsourcing more of their network related businesses.

Advertising-funded operator Blyk has focused on selling services and outsourced operating their network equipment in Britain to Nokia Siemens Networks.

"One of the clear things is that operators want their partners to do more, increasing the services business," Simon Beresford-Wylie, the head of Nokia Siemens, told Reuters in an interview at the Mobile World Congress.

TeliaSonera Chief Executive Lars Nyberg said he favoured outsourcing some functions, but keeping crucial business tightly controlled.

"Anything that is mission critical, that makes a difference if we do well or bad in the eyes of our customers, we should do ourselves. That's the reason why we exist," he said.