Nokia buys out Siemens in €1.7B NSN deal

Nokia buys out Siemens in €1.7B NSN deal

01 JUL 2013
Nokia Head Offices

Nokia has struck a €1.7 billion deal with Siemens to take full ownership of Nokia Siemens Networks (NSN), their 50/50 joint venture.

Both firms expect to close the transaction before the end of September, which requires Nokia to pay Siemens €1.2 billion in cash. The outstanding €0.5 billion balance is to be paid in the form of a secured loan from Siemens (due one year from closing the transaction).

Nokia says it has already secured bank financing for the €1.2 billion cash payment.

NSN will keep the NSN management team and headquarters in Finland but the Siemens name will be dropped.

Siemens has made no secret of its desire to exit the NSN joint venture, although the purchase of the German firm’s stake by its Finnish partner is arguably something of a surprise given past rumours of an NSN listing and attempts to find private equity buyers.

Nonetheless, news of the acquisition saw Nokia’s shares rise by more than 7 per cent on early Monday morning trading in Helsinki.

In contrast with Nokia’s struggling mobile-phone business, NSN has managed an impressive turnaround since slashing costs and focusing on mobile broadband networks and services. With an adjusted operating profit of €822 million (from net sales of €13.7 billion) during 2012, NSN is the most profitable part of Nokia’s business.

“With its clear strategic focus and strong leadership team, Nokia Siemens Networks has structurally improved its operational and financial performance,” said Stephen Elop, Nokia’s chief executive,

Elop further claimed that NSN had established “a clear leadership position in LTE, which provides an attractive growth opportunity”.

The range of NSN’s LTE activity goes well beyond radio access networks. They include professional services, 4G IMS core, customer experience management (CEM) and subscriber data management.

Pierre Ferragu, an analyst at Bernstein Research – quoted in the Financial Times – said the deal was both good and bad from Nokia’s perspective. On the plus side, he said, Nokia “buys itself a future whatever happens” to its struggling mobile phones division.

On the downside, he argues that Nokia’s balance sheet isn’t as strong as it appears at first sight. From that perspective, he says, “the acquisition of Nokia Siemens in full is a further stretch”.

For its part, Nokia said it had €4.5 billion in net cash at the end of Q1 2013, which fell to between €3.7 billion and €4.2 billion by the end of the next quarter.

Nokia says that if the transaction to purchase Siemens’ 50 per cent stake had been closed during the second quarter 2013, it claims it would have net cash of between €2.0 billion and €2.5 billion as of 30 June.


Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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