Nokia Siemens Networks, the unprofitable telephone-equipment venture of Nokia Oyj and Siemens AG, will eliminate 17,000 jobs worldwide in its biggest cull to narrow the gap behind market leader Ericsson AB.

The reduction, equivalent to about 22 percent of its workforce, will be completed by the end of 2013, when Nokia Siemens aims to cut $1.3 billion in annual operating expenses and production costs.

Nokia Siemens Networks CEO Rajeev Suri said the company will focus on mobile network infrastructure and services market.

“We believe that the future of our industry is in mobile broadband and services. We aim to be an undisputed leader in these areas,” Suri said. “At the same time, we need to take the necessary steps to maintain long term competitiveness and improve profitability in a challenging telecommunications market.”

He described the planned layoffs as regrettable but necessary.

“As we look towards the prospect of an independent future, we need to take action now to improve our profitability and cash generation,” Suri said.

Nokia Siemens, which has been struggling against rival network companies in recent years, is a 50-50 joint venture between Finland’s Nokia Corp. and Germany’s Siemens AG.

The venture, set up in April 2007 to compete against Ericsson and Chinese rivals such as Huawei Technologies Co., has fallen behind and has been unprofitable in all but one quarter.

“If you look at the last two to three years, it’s become clear that Ericsson and Huawei are quite a long way ahead of the competition,” said Mark Newman, chief research officer at London-based Informa Telecoms & Media. “NSN has struggled to remain competitive. It’s gone through periods of being extremely aggressive in terms of pitching for new business because it realized it needed to win new contracts.”

Nokia Siemens employed almost 75,000 as of Sept. 30. The company generated sales of about $254,000 per employee last year, 19 percent less than Stockholm-based Ericsson, based on numbers from the companies’ financial reports. The figure for both manufacturers is sinking as selling prices for equipment such as base stations and packet-switching networks decline.

Nokia Siemens plans to simplify its organization, consolidate sites and functions, and strip out more jobs from the integration of Motorola Solutions Inc. units acquired this year, Nokia Siemens said.

Nokia Siemens hasn’t decided how many jobs will be cut per country, spokeswoman Jozefa Terloo said from Munich.

Negotiations with worker representatives will start immediately, she said. In Germany, the venture has about 10,000 employees.

(Bloomberg news contributed to this report.)

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