Nortel Netaş president Müjdat Altay: Turkey can become telecom hub

Nortel Netaş president Müjdat Altay: Turkey can become telecom hub

Nortel Netaş, Turkey’s largest private telecommunications technology group, plans to grow by investing in cutting-edge technology and R&D projects, a senior company official has said.

C. Müjdat Altay, president of İstanbul-based Nortel Netaş Telecommunication Co., told Let’s Talk Business that Turkey could become a strategic hub in the region’s telecommunication infrastructure. He also explained how the company has diversified its market portfolio and minimized risk exposure during the crisis. Altay said Nortel Netaş will grow by bringing the latest technological developments to the Turkish market, such as cutting-edge VoIP, multimedia, fiber optic, and next-generation wired and wireless solutions.

“We have already drawn up our contingency plans and prepared to manage the crisis,” Altay said. “Nortel Netaş serves different sectors ranging from big clients, like Türk Telekom, mobile carriers and defense establishments, to small and medium-size enterprises.” The company posted $115.8 million in total sales in 2007. Its results for the third quarter of 2008 -- the most recent publicly available figures -- totaled $98.9 million. “This shows our total turnover for the last year will easily exceed the 2007 figure,” Altay said.

The company also expects to keep its lead in exporting software products in Turkey; those sales had reached $52.8 million as of the third quarter in 2008. Employing more than 1,000 engineers, Nortel Netaş commands one of the largest R&D departments in the country, certainly the biggest in the communication sector. “We do not apply for patents for our software solutions, which at times run over 50 million lines of programming language,” he said, adding that the company does not want to reveal commercial secrets and coding in its applications. The strategy is in line with major software companies that shy away from filing patents most of the time to keep its coding secret.

It is no surprise that Nortel Netaş’s top man feels passionate about R&D as he is an engineer by education and has invested 33 years of his career in the company. “I think Turkey has caught an important opportunity at this juncture to turn itself a nation with a significant lead in R&D,” he said. He mentioned that conditions for R&D are ripe and that Turkey has all it needs to become an important player in the world’s scientific and technological advancement.

“You simply can’t succeed in trying to move the country into the top 10 economies of the world if you do not invest in R&D,” he said. Altay believes Turkey has a qualified and talented pool of young engineers to support this strategy.
“If you look at the number of students who compete on university entrance exams every year, you would see the top 10,000 students out of 1.2 million applicants choose engineering as their major,” he said, adding that “the case in Europe and the US is not the same.”

Altay also pointed out that the aging population in the West created an advantage for the Turkish economy. “What Turkey can do is create businesses that serve the needs of other countries, especially European clients,” he noted. “What is more, you do not need to move people to other countries because of the rapid development in the fields of technology and communication. You can easily provide services to international clients right here in Turkey.”

In fact, Nortel Netaş seems to have done just that. Seeing an opportunity in the new government plan to support R&D and provide incentives for the long run in 2004, the company decided to expand its R&D staff from 200 to more than 1,000. “We are expecting to grow into a team of 1,500 engineers by 2011 provided that market conditions justify such an expansion,” Altay said.

Solutions for Turkish military

A majority of the shares in Nortel Netaş -- 53 percent -- is owned by global giant Nortel Networks, North America’s largest telephone maker, which delivers communication services to hundreds of millions around the world. The second major shareholder is the Turkish Armed Forces Foundation, with a 15 percent share. The rest of the shares are traded on the İstanbul Stock Exchange (İMKB). It is no surprise that Nortel Netaş has played a significant role in the modernization of the Turkish defense communication network through systems locally designed and produced to meet the needs of the Turkish Armed Forces (TSK). “We have 130 engineers dedicated to producing high-tech solutions for the Turkish military, such as ruggedized communication equipment,” Altay said.

Nortel has been active in Turkey since 1967, when it was first established as a joint venture between Turkish PTT (now partially privatized) and Northern Electric Company Limited (Nortel Networks Corp.) of Canada with the aim of supplying Turkey with locally manufactured telecommunications equipment. With more than 30,000 business customers, Nortel Netaş is the leading provider for communication infrastructure in the country. Its major clients are Türk Telekom (switching and data network equipment) and mobile operators. The service also includes end-to-end broadband, VoIP, multimedia services and applications, and wireless broadband services.

Building on its 40 years in the Turkish market, Nortel decided to establish a Global Operations Center of Excellence in Istanbul, one of two such centers in the world. The center, which became operational in April 2007, provides technical and operational support for more than 30 Nortel customer networks in more than 65 countries with mobile, converged, metro Ethernet and optical networks. “We are very strong in VOIP technology,” Altay said. “We work in coordination with other centers in India, China, Europe and the US.”

Turkey:Technology-producing country

Altay strongly believes that Turkey needs to be a technology-producing country rather than a transferring one. “Otherwise you always stay one step behind your competitors,” he stressed. He also said Nortel Netaş has contributed a great deal to Turkey’s technological development and will continue to do so. “We have created a synergy in our workforce here, and sometimes our engineers stay late at night to continue their work even though nobody asked them to do so,” he added. As he climbed the corporate ladder from an entry level position as an engineer to become the top man, he knows almost everyone in management on a first-name basis and is familiar with operations in every department.

Altay calls his young workforce “global engineers” and describes them as “very dedicated.” “The company no longer places job ads asking for experienced engineers,” he said. “Where else will they get the experience they need?” He also stressed that Nortel Netaş needs fresh minds that can think outside the box and be creative. The company provides training for its new hires and runs a master’s program with the İstanbul-based Yeditepe University to attract young graduates. “We provided 13,000 hours of training last year,” he said, stressing that education is key.
The Nortel Netaş president also believes Turkey can be a major hub in telecommunication in its region. “The infrastructure is much better compared with that of its neighbors,” he said. “We also have the technology and manpower to accomplish it.” Just as Turkey is a natural gas and energy corridor between East and West, it can also be a corridor that links the world’s communications, he noted.

Stressing that Turkey’s location is crucial, Altay said that “the only place that makes sense in laying out fiber lines between Asia/Middle East and the Europe/Mediterranean basin is Turkey.” He pointed out that current bandwidth can’t fully accommodate satellite technology and that fiber optic lines are necessary to expand communication and provide better performance.

Altay hopes the success of Nortel Netaş will lure other technology firms to develop and invest in R&D programs in Turkey. “It seems like we finally have a long-term R&D policy in place in Turkey that transcends governments,” he said.

“Here we are producing world-class technology and can compete with many international companies.”
Nortel has recently scored major deals recently in the Turkish market. Yapi Merkezi, a Turkish construction company, selected Nortel Netaş to supply the telecommunications solution for the Polatlı to Konya section of the Turkish high-speed railway project. The contract, valued at 4 million euros, will provide a fast, reliable and safe transportation infrastructure to ensure the convenience, safety and comfort of rail passengers across Turkey. Turk Telekom has also selected a Nortel IP Powered Business communications solution to unlock opportunities for new service revenue by providing carrier-grade voice and multimedia services to businesses and consumers throughout Turkey.

Nortel Netaş’s top man dismissed claims and rumors about Nortel, its majority stake holder, and said 90 percent of reports and coverage are based on rumors. The Wall Street Journal reported last month that Nortel has been seeking bankruptcy protection and has been looking for ways to secure a loan from the Canadian government. “We base our analysis on public statements released by Nortel, and we do not see any problem with the parent company,” he said. The Nortel spokesman said last month that the company had no debt maturing until 2011 and was preserving and strengthening its cash position. Speculation arose after Nortel posted a $3.4 billion loss in the last quarter.

Radio mechanic became top man in Nortel Netaş

C. Müjdat Altay had decided to be engineer when he was a kid. “I was fixing old Philips tube radios that used to go bad all the time,” he said. Soon after, he started to repair radios in his neighborhood. He recalls he was fascinated with the operation and the layout of those tube-powered old radio and amplifiers. He is a graduate of İstanbul Technical University, where he studied in the electronic and communication department. “I guess the communication side outweighed the electronic side,” he said, pointing to his 33-year R&D career in the communications field.

He established his own business with two of his friends after graduation, and they started to manufacture relays and switches for automated door lights in a makeshift apartment workshop. “We used to sell them to electric shop owners one by one,” he recalled. He later completed his graduate studies at Boğaziçi University in İstanbul and landed a job as an R&D engineer with Nortel Netaş in 1981. He climbed the corporate ladder to become general manager in 2004. He likes to read, listen to classical music and play tennis. He has very strict policy at the dinner table: No TV. “At first the kids complained, but now they like listening music while we are having supper and enjoy family conversation,” he said.

Turkey's R&D industry

Turkey’s gross domestic expenditure on R&D (GERD) totaled $4.3 billion in 2008. In terms of percentage, GERD accounted 0.70 percent of the country’s GDP in 2006. Turkey ranked 25th in terms of R&D spending for 2008, according to the 2008 Global R&D Report issued by US-based monthly magazine R&D. Turkey received 6,188 patent applications in 2007, 70 percent of which came from foreign applicants.

Nortel Netaş President Müjdat Altay believes government needs to subsidize R&D until spending for it reaches 2 percent of gross domestic product (GDP). “It needs to be a long-term policy, going well over 10 to 20 years,” he said.
“At 1 percent of GDP, we can talk about an R&D culture in Turkey. At 2 percent, we can safely say it is in line with world standards.” He also said the only subsidy allowed for governments under the guidelines issued by the World Trade Organization (WTO) in the global economy today is to provide funding for R&D. Altay believes Turkey can play an important role for its immediate geographic area if it succeeds in this R&D policy.

A new R&D law came into effect as of April 1 in Turkey and introduced incentives and support for investors in R&D activities, through tax incentives and land allocations. According to the new law, incentives will be granted regardless of sector or industry until 2024 for companies that employ at least 50 staff members in their R&D departments. The law also covers companies that have no production plant here but would like to establish an R&D facility in Turkey. The state guarantees an 80 percent reduction in personal income tax for people who are employed in R&D, plus the employer gets a 50 percent break on social security payments for five years. Companies can deduct all R&D expenses from taxes.