& 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
CommScope – Meeting the Demands of Tomorrow's Networks

3|24|17   |     |   (0) comments


Phil Sorksy, Vice President International at CommScope, discusses addressing the challenges faced by service providers today, and as future trends emerge.
LRTV Huawei Video Resource Center
AMS-IX & Huawei's OSN 902

3|24|17   |     |   (0) comments


Huawei shows how its OSN 902 platform helps the Amsterdam Internet exchange to connect the world using multiplexing.
LRTV Huawei Video Resource Center
Huawei's Smart Energy Innovation Center

3|24|17   |     |   (0) comments


In Nuremberg, Huawei showcases its latest capabilities in the digitalization of Internet resources, network infrastructure and intelligence at its Smart Energy Innovation Center.
Valley Wonk
OFC & Hyperscale: A Good Mix?

3|24|17   |   01:50   |   (0) comments


Cloud and telecom players want different types of equipment for their networks, as the chatter at OFC reveals.
LRTV Custom TV
Etisalat on NFV Journey

3|24|17   |   10:37   |   (0) comments


Etisalat is a service provider that prides itself on bringing innovative technologies to the markets it serves. It was one of the first operators to implement 3G and leads the pack in fiber penetration. Now, Esmaeel Al Hammadi, Etisalat's SVP of Network Development, explains the operator's journey to virtualization, beginning with the network core, as well as the ...
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 3

3|22|17   |     |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting on the application of technologies and key business verticals such as transportation, smart city, manufacturing, media and finance.
LRTV Documentaries
No Regrets: Cox's Finkelstein on Fiber & More

3|22|17   |     |   (0) comments


At the Cable Next-Gen Technologies & Strategies event in Denver, Cox's Jeff Finkelstein examines the cable capex conundrum.
LRTV Documentaries
Cable Next-Gen: The 'Mile High' View From Denver

3|22|17   |   11:56   |   (0) comments


Alan Breznick kicks off the Cable Next-Gen Technologies & Strategies event in Denver, casting his thousand-yard stare over cable's current competitive landscape.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 2

3|21|17   |   2:27   |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting digital transformation solutions around IoT, smart data centers, OpenCloud ecosystem and its newly announced storage-as-a-service solution.
LRTV Custom TV
Driving Better Mobile Customer Experience While Transforming the Mobile Network

3|21|17   |   7:47   |   (0) comments


The Citrix NetScaler mobile gateway is an intelligent traffic management solution which can markedly improve the customer experience provided by mobile operators, even when traffic is encrypted. Critical network services can be consolidated and virtualized using NetScaler. Because of the unique architecture, NetScaler can be deployed on any hypervisor, on a ...
LRTV Custom TV
Mastercard: What's Next for Mobile Payments?

3|21|17   |   7:49   |   (0) comments


2017 marks the fifth consecutive year for Mastercard at Mobile World Congress and it was a great time to reflect on the amazing advances the payments industry has made as well as discuss "What's Next' in the digital commerce future. We spoke to James Anderson, executive vice president of digital payments at MasterCard, about digital wallets to tokenization to ...
LRTV Custom TV
Mastercard: 2 Billion Adults 'Trapped' in Cash Economy

3|21|17   |   03:51   |   (1) comment


Despite advances made in the last several years, two billion adults around the world are trapped in a cash economy and lack what we take for granted -- a safe way to receive, save and use money. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, chats about how Mastercard is developing new ways to ...
Upcoming Live Events
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
High-Band 5G: Let's Address the Range Question, Shall We?
Dan Jones, Mobile Editor, 3/21/2017
Eurobites: A1, Nokia Turn It Up to 11
Paul Rainford, Assistant Editor, Europe, 3/22/2017
FTTH No Slam Dunk for Cable
Carol Wilson, Editor-at-large, 3/23/2017
Top Priorities for B/OSS Transformation
James Crawshaw, Senior Analyst – OSS/BSS Transformation, Heavy Reading, 3/20/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
At MWC 2017, Qualcomm's CTO Matt Grob talks to Light Reading's CEO and Founder Steve Saunders about the progress being made in the development of the technologies and standards that will underpin 5G.
Animals with Phones
Neither Do We Click Here
Is that a prerequisite?
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.