Brand names sometimes die slowly. Nokia CEO Rajeev Suri recently visited an Israeli hotel, and the workers asked who he was. When I told them he was CEO of global company Nokia, they unexpectedly asked to be photographed with him. The Nokia brand name is still alive, even though Nokia long ago stopped manufacturing cellular telephones, and became one of the world's leading communications manufacturers.
Over the past year, Suri was responsible for completing the merger between Nokia and Alcatel-Lucent, which Nokia acquired for $16.6 billion.During his visit to Israel, Suri met with Head of Nokia Mediterranean (which includes Israel) Aric Tal, and with local communications companies.
"Globes": Why are you visiting Israel?
Suri: "I came as a guest of Deutsche Telekom for meetings with venture capital funds and startups. Deutsche Telekom is one of the world's leading communications groups, and we have excellent relations with them all over the world. Deutsche Telekom holds a summit conference every year on innovation, and decided to hold it in Israel this year. I met with higher education representatives, investors, entrepreneurs, and of course with promising technology companies, in security, artificial intelligence, virtual reality, etc.
"We were very impressed by the atmosphere of innovation in the Israeli startup community. We'll continue to consider interesting opportunities in Israel, among other things through Nokia Growth Partners, our investment fund. The fund has already invested in Israeli companies, and sponsored the IoT Israel conference two weeks ago at Tel Aviv University. Incidentally, this is not my first visit to Israel. I have already been here four or five times, and I have been very impressed by your great capabilities. Israel is important for Nokia in innovation, and that's why I'm here. There's no doubt that I'll visit here again soon."
You no longer manufacture cellular telephones, but it looks like the public still thinks that you do.
"Many people do identify us with the excellent telephones we made up until a few years ago, but Nokia isn't a telephone company. It's an important part of the history of Nokia, which has existed for over 150 years, but it's over. You may see smartphones with the Nokia logo next year, but they will be from a different company that has purchased from us the right to use the brand name. Our core activity over the years has been in advanced communications networks, and we're actually the network infrastructure supplier for all the world's major communications operators. We have recently done a lot of development in the cloud computing segment, Internet of Things, and 5G cellular technologies."
"We've been here since 1999"
Can you describe your business in Israel to me?
"We build communications networks in Israel, and have been here in force since about 1999. Most of our activity is with the large communications groups -Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Hot Telecommunication Systems Ltd. (TASE: HOT.B1), and so on - but we have also been working recently with large business enterprises. Actually, over half of the communications traffic in Israel passes over infrastructure that we set up and maintain. It happens in both landline and cellular networks, in the private sector, the business and institutional sector, inland communications, undersea cables, and elsewhere.
"Tal, who manages 230 people here, works through a center for engineering sales and large projects for the local market. We have a large global development center for Cloudband, Nokia's cloud division, researchers of the famous Bell laboratories, and a group of innovation people working on special projects. We're also looking for interesting Israeli technology companies."
You spoke about Nokia's investments in Israel. Can you give some details?
"Nokia has invested money in promising Israel technology companies, such as the Team8 cyber incubator, public transportation social app Moovit, and VoIP platform company Kaltura."
Nokia recently acquired communications provider Alcatel-Lucent. How is this going?
"The acquisition of Alcatel-Lucent was excellent for us. The existing synergy between the product lines is amazing. At Nokia, we brought mainly our leadership in the cellular networks world, and Alcatel-Lucent brought leadership in the landline networks, optics, and data (IP). As far as merging the two organizations is concerned, most of it is already behind us, and we are functioning as a single company for all intents and purposes. One of the indications of success for me is the projected saving from synergy between the two enterprises. We initially expected to save €900 million on operations. Recently, following the merger results, we have increased our estimate of the saving to €1.2 billion.
"In comparison with previous mergers in the industry (such as Nokia with Siemens, Alcatel with Lucent, and others), we applied the lessons we learned from the past by creating a well-defined, efficient, and clear process that has yielded more satisfactory results. Uniting the platforms was done in the record time of a few months, less than a quarter of the usual time in similar mergers in the industry. Our people define our success, so we set out to bring them to sit together in joint offices as soon as possible, and to create a healthy work environment. The bottom line is that I'm very satisfied with the process.
"The merger also went smoothly in Israel. We made sure that our customers would not feel any decline in the service they get from us. We speeded up the process of former Alcatel personnel sitting together with Nokia people in order to create synergy, and up until now, the process is definitely satisfactory. I hear positive comments from our customers."
"It's no longer relevant"
Why did you eliminate the Alcatel-Lucent ALU brand name?
"There's no doubt that both the Nokia and Alcatel-Lucent brands are very strong brands in communications networks. At the same time, as one of the lessons from the past, we didn't want a partnership without clearly defined responsibility. We decided that we wanted to deliver one strong message from Nokia, with one CEO and one logo. In order to succeed, the direction and who is leading have to be very clear. As I told you, we used to make cellular telephones under the Nokia brand name, and more are slated to appear next year. There are also landline and cellular phones in the market under the Alcatel brand names. All of these cases involve companies that bought a license to use the brand name. None of this is relevant for us anymore. As Nokia, we no longer deal in this."
What are you focusing on now?
"The new Nokia is focusing on five main fields: maintaining our lead in advanced communications solutions for communications companies in all areas; expanding to the institutional-business market in energy, transportation, health, the public sector, large technology companies, and large Internet companies; establishing strong and independent software business beyond our communications products; setting up new business activities with an eye to the consumer market, such as digital health, digital media, and granting licenses to use our brand name for consumer sector products; and expanding our business in the new technologies we spot in our business environment, and integrating them in in the communications solutions we offer."
"Automating day-to-day tasks"
What trends have stood out in recent years in the communications industry?
"There's no doubt that we'll see more and more IoT apps. A few years ago, six billion people were connected to the global communications network. In a few years, we'll see 100 billion different devices, 'things', connected to the Internet, most of which do not involve an individual user. We know how to cope with the technological challenge involved in connecting all these 'things', but it's more interesting to ask what they will do after they are connected with each other through the Internet. I'm convinced that the consumers will be able to benefit from new services, and that automating daily tasks will enable us to 'make back' some of the available time lost over the years.
"The various industrial operators will also become more digital, more connected, and more efficient as a result of the IoT revolution. There are many examples of this: earlier detection of water leaks in pipes, earlier detection and prevention of assembly line malfunctions, more efficient energy production, environmental monitoring, advanced parking, smart cities, agriculture, and even accelerated development of advanced drugs.
"Another revolution related to its predecessor is 5G - fifth generation cellular. In most countries, including Israel, we have deployed advanced 4G networks, and we are already looking towards the future. 5G will bring with it the ability to cope efficiently with billions of connected devices, while at the same time shortening response times, the 'lag', which is critical for many apps. Response time is the time it takes from the moment you press the button on one side until the action takes place on the other side.
"Think, for example, about surgery conducted by robots. Whether an emergency or a remote region is involved, it is impractical to wait for an expert to arrive. If we give the surgeon the ability to control the medical robot's actions from a distance, and if the robot responds rapidly enough when the doctor moves his hand, we'll help save lives - no less. Another example being tested in Germany is a system for reducing traffic accidents through real-time reporting to the car computer of an especially imminent danger, about another driver driving dangerously, emergency braking further on in the lane, etc.
"In the services that communications companies provide to consumers, we'll also see interesting changes. For example, in the US, Internet in the car is becoming an integral part of a family package. Every day, 100 billion Internet surfing hours take place in cars. The subscribers are switching more and more from individual surfing (each person on his own with the cellular company) to concentrated surfing through the cellular router installed in the 'smart car'. It is therefore logical to include the care in the family package, including advanced services for the car, such as monitoring and recommending the best travel route, alerts about auto malfunctions, warnings about the surroundings outside the car, etc.
"Another example we'll see is services such as the digital wallet, which I believe we'll use more and more in our lives. I'm referring to payment by cellular for various products, including even mortgage payments. The major communications companies don’t want to stay in "stupid channels," so they're entering the media fields and advertising. For example, see AT&T's effort in the US to acquire the Time Warner media company; Verizon, which acquired America On Line, and more. In the next five years, we'll see a very different communications world than the one we know today."
You mentioned IoT. Which communications companies do you think will lead the global IoT revolution: landline communications companies or cellular ones?
"In most cases around the world, unified companies are providing all these services under one brand name, so the border between landline and cellular is becoming blurred. The regulators have to realize that this consolidation enables to the companies to invest in their infrastructure and provide more advanced services to the consumers. Incidentally, when I talk about landline communications, I'm also referring to the cable companies. The answer to your question is therefore that all types of communications companies are suitable for leading the IoT market."
"Google and Facebook are developing and upgrading services at a record pace, but the communications companies are acting more cautiously and slowly"
People have been aware of cloud computing for a long time. Nevertheless, other than basic services, we aren't seeing many communications companies entering the field in full force. Why is this?
"Yes, some of the communications companies are providing basic services without cloud computing constituting a substantial part of their core business. They're maintaining 'small' cloud infrastructure together with the operational network, but not within it. They're still unaware of the many advantages of cloud computing. The large global communications companies are well aware of this, and they are there already. Some of them began implementation even before 2016.
"When you put the cloud into the core operational network, when you adopt cloud technologies within your communications network in order to provide service to your customers, you both save on costs and are able to provide advanced services to your customers at peak times. Costs are cut because the hardware is cheaper, utilization of resources is smarter, it is simpler to integrate different suppliers, backup and survivability are better, etc. I believe that most of the companies are well aware of this.
"That's why it's important for me to talk about the second and less well-known advantage of switching to the cloud - the ability to provide advanced services to customers. On the one hand, the major Internet companies, such as Google, Facebook, and so on are developing and upgrading services at a record pace. On the other hand, the communications companies are acting cautiously and slowly when they launch a new service. Adopting cloud technologies will enable them to be quicker and defter and to launch services in record time - in 24 hours, instead of months. It will enable them to rapidly enter the new IoT sectors and take risks more easily, because the cost of a mistake will be low, and it can be corrected quickly. They can attract startups and enable them to develop their cloud and launch apps with a short time-to-market. In this way, communications companies can create new sources of revenue for themselves."
Why do you think the European communications companies are making slower progress than their counterparts in the US and the Far East?
"The main problem in Europe is excessive regulation and the tendency not to approve mergers between communications companies. This policy does not encourage infrastructure investment, because competition is too intense and profits are being eroded. This policy also affects the quality of the cellular networks and devising and implementing innovation and progress. We see this clearly when we compare Europe to other markets. The average revenue per cellular subscriber in the US and Japan is triple and double, respectively, what it is in Europe, and that says it all. Competition is a good thing, but when competition is too intense, there is no readiness to invest in the network. The problem is that there are too many communications players in every European country. A healthy situation is two or three communications providers in each market. In the US, for example, there are two main players, AT&T and Verizon, followed by a smaller third player, T-Mobile. The same is true in China, India, Japan and elsewhere. In this situation, competition is good enough, while on the other hand, there is willingness to invest in infrastructure and to bring advanced services to the customer.
"It's not just a matter of advanced services. We're relying more and more on cellular as a critical network. In the future, this dependence will grow, with public safety, smart cars, and other apps. The quality of communications networks must be of the highest, so that we'll be able to rely on them when we need them. This quality will not be achieved as long as the communications companies' profits are sliding and there is no inclination to invest.
"In the bottom line, the regulators in Europe and throughout the world should adopt a policy that encourages investment in infrastructure, so that all of the consumers can have better and more reliable networks. From my knowledge of the communications companies in Israel, I am convinced that they will invest more in infrastructure with a regulatory policy that is friendlier to investment."
Published by Globes [online], Israel business news - www.globes-online.com - on November 29, 2016
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