Nokia to Take Full Control of NSN
The deal ends months of speculation surrounding the network infrastructure joint venture, which has shown signs of financial stability during 2013. (See NSN Maintains Momentum and Is NSN Ready to Be Sold?)
Siemens, which decided some years ago that the telecom sector was no longer part of its core focus, had been looking to offload its stake for some time and had reportedly stepped up its efforts to do so during the first half of this year. (See Might NSN Become NNN?)
Now, just over six years since the joint venture was formed, Nokia Siemens Networks is to change ownership and change its name. Nokia will pay €1.2 billion ($1.57 billion) in cash and the remainder in the form of a secured loan one year after the deal closes.
That seems like a low price for a half share of a vendor that generated revenues of €13.78 billion ($18 billion) and an operating margin (after one-time costs) of 5.6 percent for the full year 2012.
The deal is set to close before the end of September, after which NSN will drop 'Siemens' from its name: Nokia says it will unveil the infrastructure vendor's new name once the deal is completed. (Nokia Networks does seem like the most likely option…)
The current management team headed by executive chairman Jesper Ovesen and CEO Rajeev Suri will be retained, while the membership of the vendor's board will change to reflect the new ownership. (See NSN's Rajeev Suri: Restructuring, Research & Resilience and NSN's Rajeev Suri: Carrier Capex & Customer Experience.)
Nokia's investors clearly like the deal the Finnish handset giant has struck as Nokia's share price is up 7.3 percent to €3.05 Monday morning on the Helsinki exchange. And Siemens investors appear to be glad that a deal has been struck at all, as the German firm's stock is up 1.5 percent to €78.79 on the Frankfurt exchange.
Six years of struggle
NSN was formed on April 1, 2007, when the joint venture partners combined their telecoms infrastructure subsidiaries (Nokia Networks and Siemens Communications) to form a European powerhouse. (See Nokia Siemens Opens on a Downer.)
But little has gone right for the venture since its inception as it battled merger pains and intense competition from Ericsson AB and Huawei Technologies Co. Ltd.: Its parents were forced to inject fresh funds into the company in 2011 and implement a massive restructuring program to keep it afloat. (See NSN Gets $1.36B & New Leader and NSN Could Lose More Than 17,000 Staff.)
But that painful restructuring process, which has involved significant job cuts and the sale of non-core parts of the company, has helped NSN improve its margins, while the focus on mobile networks, professional services and customer experience management (CEM) offerings has given the vendor a decent foothold in the global 4G networks market.
Now Nokia will need to show it hasn't made a big mistake in using up precious cash reserves on a networks operation, while the NSN team will need to prove it has market momentum and continue to improve its financial health.
What this move doesn't do, though, is answer all the questions about NSN's future. Nokia notes that it will "continue to strengthen the company as a more independent entity," a statement that leaves the door open for a separate listing of NSN in the future.
— Ray Le Maistre, Editor-in-Chief, Light Reading