01:01 am - Wednesday 22 November 2017

Nokia Siemens partnership may end soon

By insightVAS - Mon Mar 25, 5:38 pm

After a joint venture for  six years, Nokia Siemens Networks is heading towards a split. Both the companies Nokia Oyj and Siemens AG are seeking to be independent.

Initiating the division, Nokia Siemens Network is selling bonds worth 600 million Euros ($779 million). The company also published a detailed list of assets and liabilities. Proceeds from the sale will be used to sell the five-year and seven-year senior notes in order to repay debts. At the end of 2012, the company had listed cash and equivalents of 2.42 billion Euros and debt of 1.13 billion Euros.

This news comes at a time when the company started tasting success after it crashed badly in 2009. It managed an operating profit of 14.4% for the fourth quarter and sales of 3.99 billion Euros, making it Nokia’s fastest growing segment. In spite of that, the venture was still in the red by 1.46 billion Euros in 2012, higher than the 710 million Euros loss in the previous year. Nokia Siemens accounts for 83% of Nokia’s market value, which happens to be about 9.7 billion Euros. Siemens’ share price increased by 0.7 percent to 84.06 Euros at the close of trading in Frankfurt, whereas Nokia shares closed at 2.58 Euros in Helsinki.

CEO of Nokia Siemens Network, Rajeev Suri, stated last month that the company which had earlier announced that it was eliminating 17,000 jobs was now working to exceed its target of saving 1 billion Euros in operating expenses. The company will now be focussing on improving margins at a time when industry revenue is largely stagnant and also for being in a position to seize opportunities when the market begins growing again. In addition to concentrating on wireless infrastructure, for which its assets have been sold, it is also trying to promote its services business.

While Nokia Siemens Network continues to consider options to terminate the partnership, the future of the unit remains uncertain as a shareholder agreement will be coming up for renewal in April. Nokia Siemens CFO Samih Elhage claimed that the company will continue to focus on building a strong and sustainable business with the right capital structure. There is a strong possibility of Nokia and a strategic partner buying out Siemens’ 50% stake jointly.

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