Light Reading

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
Flash Poll
From The Founder
Ericsson's Hyperscale Datacenter System (HDS) 8000, featuring Intel's Rack Scale Architecture, caused a stir when it was announced at MWC 2015. For more on this revolutionary product, join me on Thursday, April 30 at 12:00 p.m. EST for a Super Webinar event, A New Hardware Paradigm for the Telco Data Center.
LRTV Documentaries
Cox Eyes Cloud-Based Home Networks

4|27|15   |   05:30   |   (0) comments


Cox's Jeff Finkelstein explains how moving services to the cloud will let cable deliver services faster and eliminate constant hardware replacements.
LRTV Documentaries
CableLabs' Clarke Updates Cable Virtualization

4|23|15   |   05:41   |   (1) comment


Former BT exec now leading CableLabs' NFV and SDN efforts explains key role of open source and updates efforts to virtualize the home network.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. II

4|23|15   |   08:19   |   (1) comment


In the second installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about cultural change, network slicing and technology advances.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. I

4|23|15   |   09:27   |   (3) comments


In the first installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about the incredible transformation underway in the communications networking industry.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
Upcoming Live Events
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
In its latest survey covering network operators' plans and strategies for ICT transformation, Heavy Reading asked telecom operators worldwide to identify the most important goals and objectives for their ICT transformation initiatives. Heavy Reading also asked operators about the importance of a "digital first" strategy, which enables customers to complete an interaction across different digital channels, such as web and mobile self-service and social media.
Hot Topics
Comcast Formally Ends Its Bid for TWC
Mari Silbey, Independent Technology Editor, 4/24/2015
Adtran Is Developing White Box GPON Tech
Ray Le Maistre, Editor-in-chief, 4/24/2015
Comcast Reportedly Dropping $45B TWC Bid
Sarah Thomas, Editorial Operations Director, 4/23/2015
Google's WiFi-First Mobile Service 'Fi' Is Here
Dan Jones, Mobile Editor, 4/22/2015
Amazon Earnings: What to Watch For
Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/23/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Many leading communications companies can claim to have undergone significant periods of reinvention during their histories, but none have been through more major ...
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
Cats with Phones
Learning Curve Click Here
Pierre could never remember how to use Excel.
Latest Comment