Nokia Siemens deal means more deals are due-industry

STOCKHOLM/LONDON, June 19 (Reuters) - By joining up telecoms networks maker Siemens and Nokia can spend more on research and marketing, which means more industry consolidation, analysts said on Monday.

''This is not over. The big players have now merged, and the small players cannot really make a profit in the long run,'' said analyst Sylvain Fabre at research group Gartner.

The chief executive of Nokia-Siemens' main rival Ericsson, conceded it was another step in a highly competitive market. ''In this context mergers are natural,'' Carl-Henric Svanberg said in a statement.

Nick Maynard, a senior analyst at market research group Yankee, was convinced more deals will follow. ''The momentum will only pick up because you don't want to be the last standing without a partner, or be forced to accompany a second choice.'' Within a year, the telecoms equipment industry has seen two mergers and a strategic shift towards a world in which communications, both voice and data, are to become as ubiquitous and uniform as access to the electricity grid network.

In April, Lucent and Alcatel agreed to merge and create the world's top communications gear maker with billion in annual sales. Nokia and Siemens can expect to have joint sales of around billion, based on last year's annual reports. Both companies build mobile and fixed line networks used by hundreds of millions of consumers.

The joint venture is valued at about 20 billion euros, according to sources close to the deal.

Ericsson, with sales of around billion, in its turn has recently acquired fixed-line gear maker Marconi to expand its wireless communications stronghold, the world's biggest.

Convergence of networks is the trend in the telecoms equipment market, where operators aim to provide service both on the fixed line at home or in the office and a seamless transition to mobile networking.

One of the core technologies behind the trend is IP Multimedia Subsystem (IMS), which operators use to provide services such as calling and the Internet.

''It shows the necessity of having both sides (fixed and mobile).

Nokia had to do something,'' said Ohman analyst Helena Nordman-Knutson.

If the top five communications gear companies are coming together because they feel they need more scale to afford the billions of dollars of research into converging communications, this certainly leaves smaller companies wondering what they need to do, analysts and company advisers said.

''The second half of the top 10 like Nortel, Motorola and Samsung are probably wondering what to do,'' Gartner's Fabre said.

U.S.-based Cisco, the world's biggest communications equipment company with roughly billion in revenues, could benefit from a partner in radio access, such as Motorola, he added.

Niche players in fixed-line communications like Israel's ECI Telecom and Juniper from the United States may also rethink their positions, especially now that players from China, such as Huawei and ZTE are taking sales in a market seen growing by a modest 3 to 4 percent a year.

''Nokia/Siemens is still mainly wireless access. So at some point, it is going to have to round out the portfolio,'' said one person close to the deal.

(Additional reporting by Lucas van Grinsven in Amsterdam and Aitsuko Ando in New York) REUTERS ARB PM2035