Nokia Siemens Networks announced a €500m cost-cutting programme yesterday as the company battles weak demand and increasing competition in the telecommunications equipment sector.

The joint venture between Nokia of Finland and Siemens of Germany also unveiled plans to sharpen its focus on software and services as Chinese rivals grab a growing share of the hardware market.

The measures, including up to 5,800 job cuts, were unveiled a month after a management shake-up that saw Rajeev Suri replace Simon Beresford-Wylie as chief executive.

NSN is under pressure from its parent companies to improve performance after Nokia announced a €908m ($1.3bn) writedown on its share of the joint venture last month and acknowledged the business was losing market share.

Problems at NSN have created an additional headache for Nokia at a time when it is also facing challenges in the handset market, with devices from Apple and other entrants.

Network equipment makers have seen their order books thin out this year as credit-starved operators cut back on capital expenditure amid the global downturn.

Ericsson and Alcatel-Lucent, the other big European competitors, announced worse-thanexpected third-quarter results last month and warned market conditions remained challenging.

NSN has found itself squeezed between Ericsson, the biggest player in the industry, and fast-growing Chinese rivals, such as Huawei and ZTE. Mr Suri said NSN planned to seek partnerships and acquisitions in an attempt to achieve greater scale while accelerating its shift towards services and software to reduce dependence on equipment sales.

Ericsson already derives about 40 per cent of its revenues from outsourced services, such as managing operators' networks.

Mr Suri said demand for consultancy services and software solutions would continue to increase rapidly

as surging data traffic transformed the telecoms landscape.

NSN was created in 2007 through a merger of its parent companies' network equipment businesses.

"Despite having fully achieved the original merger integration savings objectives of NSN, changes in the global economy and competitive environment make further cost reductions necessary," the company said.

NSN aims to cut €500m in annual costs by the end of 2011, mainly through a

7-9 per cent reduction in its 64,000-strong workforce.

In July, NSN lost out to Ericsson in a bidding war for the coveted wireless assets of Canada's Nortel Networks.