& cplSiteName &

Nokia Siemens JV in Jeopardy

Light Reading
News Analysis
Light Reading
12/14/2006
50%
50%

A corruption scandal that includes charges of money-laundering via Greece and Lichtenstein has thrown a spanner into the works of the merger that would create the world's second-largest vendor of wireless infrastructure.

In a terse, 219-word statement, Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE), whose combined networks divisions were forecast to generate $23.15 billion in revenue in 2007, said they would delay the launch of the joint venture until the first quarter of 2007 rather than starting with the new year. (See Nokia, Siemens Create Networks Giant.)

"In light of the current investigations of Siemens, the scope of which includes the carrier-related business to be transferred to the new company, Nokia and Siemens intend to adjust their agreements in order to have Siemens conduct an appropriate compliance review prior to closing of the transaction," the two companies said.

The statement also said the merger "will be subject to an agreement between Nokia and Siemens on the results and consequences of a Siemens compliance review."

The announcement followed a meeting of the Siemens supervisory board on Monday to discuss the affair, which has already resulted in the arrest of a former top manager of the company's telecoms equipment division. German newspaper Frankfurter Allgemeine Sonntagszeitung ran a story over the weekend quoting an anonymous Siemens manager, who said the company fears that Nokia might pull out of the joint venture entirely depending on how far the scandal reaches.

Authorities have raided Siemens offices including that of CEO Klaus Kleinfeld, charging that the company has engaged in kick-backs and bribes for European network contracts, and has funneled money through private accounts in Switzerland, Greece, and Lichtenstein.

The market uncertainty surrounding the now wobbly JV will the hurt the combined companies even more than the direct financial losses from delaying for a few months, says Carmi Levy, senior research analyst at Info-Tech Research Group.

"On the surface, it delays the start of a combined revenue stream and the realization of the projected economies of scale that justified the deal in the first place," Levy comments in an email. "More deeply, it puts potential clients on hold as they wait for the Siemens investigation to play out."

"This is a timetable change only," asserts Nokia spokeswoman Laurie Armstrong. "The intent to form Nokia Siemens Networks and the business logic of the transaction remains unchanged and we will continue the integration process as planned."

That, however, could change. Asked if the growing scandal is enough to scuttle the merger, Gartner Inc. research vice president Phillip Redman replied, "Absolutely" in an email.

"This is enough for Nokia to walk away now without penalty, especially if financials are at stake and misstated," Redman adds. "This could take a long time to sort out and Nokia may not have the patience."

Abandoning the combination now would leave a gaping hole in the strategies of both Nokia, the world's No. 1 maker of cell phones, and Siemens, whose stock has shot up nearly 20 percent since the deal was announced in June. An October report from Unstrung Insider, titled "Vendor M&A Frenzy: What Happens Next," noted that major deals including most of the largest wireless infrastructure providers have created a "de facto oligarchy" of suppliers that will account for more than 80 percent of worldwide cellular infrastructure revenues in coming years.

"Size directly influences a vendor's ability to invest in R&D, optimize the supply chain and manufacturing, provide financing, achieve geographic diversity, and, ultimately, make a profit," wrote analyst Gabriel Brown, the author of the report.

The worldwide wireless infrastructure market is expected to hit $56 billion in 2006. Ericsson AB (Nasdaq: ERIC), the world's No. 1 vendor, controls around 26 percent of that. The combined Nokia Siemens Networks would have about 20 percent, according to analysts' estimates.

— Richard Martin, Senior Editor, Unstrung

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
What WTTX Can Deliver

2|23|17   |     |   (0) comments


Mohamed Madkour explains the benefits of WTTX while Dimitris Mavrakis discusses the challenges of delivering home broadband access.
LRTV Custom TV
Huawei on Mobile Broadband

2|23|17   |     |   (0) comments


Mohamed Madkour shares his vision on MBB for the next three years.
LRTV Custom TV
Analysys Mason Talks About the Future of Digital Operations

2|23|17   |     |   (0) comments


The future of digital operations has three key aspects: 1. Highly automated operations for both service and network; 2. Highly converged BSS/OSS for business and resources; 3. Highly merged management and control for real-time cloud native operations.
LRTV Interviews
Software Trends in the Telecom Sector

2|23|17   |   03:40   |   (0) comments


Heavy Reading senior analyst James Crawshaw talks with Telecoms.com Editorial Director Scott Bicheno about trends and developments in the telecoms software sector and what to expect at MWC 2017.
LRTV Custom TV
Huawei's Pre-MWC Analyst Briefing 2017 Highlights

2|22|17   |     |   (0) comments


Huawei shares its vision for this year's MWC.
LRTV Interviews
MWC17: 5G, Cloud RAN & More

2|21|17   |   04:35   |   (0) comments


Ovum Senior Analyst Julian Bright talks to Scott Bicheno from Telecoms.com about all things MWC, including Cloud RAN, Huawei's pitch to the industry and the road to 5G.
LRTV Interviews
MWC 2017's Key 2-Letter Terms

2|20|17   |   08:29   |   (1) comment


5G, AI, VR... these are just some of the two-letter terms that will dominate show-floor chat at MWC 2017 in Barcelona, according to these two blow-hards (a.k.a. Scott Bicheno of Telecoms.com and Light Reading's Ray Le Maistre). And then there's PB...
LRTV Interviews
Key Trends for Mobile Operators in Developing Markets

2|20|17   |   06:37   |   (0) comments


Ovum's Matthew Reed talks to Scott Bicheno from Telecoms.com about the challenges and opportunities facing mobile operators in the developing markets of Africa and the Middle East.
LRTV Documentaries
YouTube Takes on Facebook Live-Streaming

2|17|17   |     |   (0) comments


Popular 'YouTubers' will be the first to get the new service on their smartphones. You have been warned.
LRTV Custom TV
Open Source NFV/SDN Automation

2|17|17   |   05:54   |   (0) comments


AT&T ECOMP (Enhanced Control, Orchestration, Management and Policy) code is transitioning into the Linux Foundation for placement into open source. In this video, Carol Wilson provides an update on the maturation of open source ECOMP and meets with industry leaders from AT&T, Bell Canada, Orange, Linux Foundation and Amdocs to discuss what this means for the ...
LRTV Documentaries
Uber & NASA Collaborate on Flying Car Project

2|16|17   |     |   (0) comments


Is Uber for real? Well, it's hired NASA engineer Mark Moore to lead the project, and he wouldn't come cheap.
LRTV Documentaries
Zuckerberg Tries Out the Oculus Rift VR Glove

2|15|17   |     |   (0) comments


Facebook CEO shows off a new way to interact with the Oculus Rift virtual reality headset: an Oculus glove.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Uber's HR Nightmare: Company Investigates Sexual Harassment Claims
Sarah Thomas, Director, Women in Comms, 2/21/2017
Broadband Has a Problem on the Pole
Mari Silbey, Senior Editor, Cable/Video, 2/21/2017
Verizon to Start Fixed 5G Customer Trials in April
Dan Jones, Mobile Editor, 2/22/2017
Sprint to Go Gigabit Crazy at MWC!
Dan Jones, Mobile Editor, 2/22/2017
MANO Marriage: ECOMP, Open-O Converge as ONAP
Carol Wilson, Editor-at-large, 2/23/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Animals with Phones
No One Likes This Click Here
Take a hint!
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.