Nokia Siemens Network signed a contract with Flextronics International Ltd. (NASDAQ:FLEX) (FRA:FXI). to build a plant in Brazil for next generation mobile networks, according to a report from Reuters.
Ken Wirth, head of Americas region for Nokia Siemens Network said the company wants to align its manufacturing capacity close to their target markets, to reduce expenditures in transportation, tariffs, and other related costs. He said the company’s target is to begin shipping fourth generation (4G) wireless devices by October, in conjunction with the 2014 World Cup.
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In addition, Wirth said Nokia Siemens expects to increase its market share in Latin America by one third, with the production of its new 4G networks in Brazil. According to him, the Latin American region is growing fast. Nokia Siemens 13 percent of its revenue from the region, more than its revenue generated from North America.
Wireless carriers in Brazil allocated approximately $1.5 billion in capital expenditures next year, and 30 percent of the money is dedicated to the 4G technology. Operators also committed minimum investments for their own 4G networks to cover host cities during the Confederations Cup in 2013, an event in preparation for the World Cup.
According to Wirth, Nokia Siemens is prepared with the surge of demand particularly from foreign fans during the World Cup. He said the company will roll out small cell technology to offer concentrated coverage below the cost of new antennas. The small cell installations will also provide an opportunity for the company to return to the United States after missing the rush of major 4G contracts. Wirth said, “Small cell is the next wave. Since we haven’t gotten any of that business, if we get into small cell it’s all upside.”
Nokia Siemens is expected to install small cell units in the United States and Japan by the end of 2013. Wirth said, carriers are expected to allocate 70 percent of capital spending to the technology.
Wirth said Nokia Siemens will be able provide the demand of the Brazilian companies for 4G networks within the first 12 to 18 months. After that, the Brazil plant will be able to provide coverage to entire Latin American region.
The Brazilian government required at least 60 percent of Brazilian content installed in the hardware of 4G networks part of the 4G broadcast licenses issued in June. The United States and the European Union both challenged Brazil’s requirement in the World Trade Organization (WTO).