Nokia In Dilemma Over NSN

Nokia 8Hermann / Pixabay

Siemens is in a quest of finding an appropriate buyer for its Nokia Siemens network. The Nokia Siemens network is a joint venture of wireless infrastructure of both companies.

Nokia In Dilemma Over NSN

According to the reports, Siemens has considered private equity players like Blackstone, TPG and KKR. The German company wants to know that if these private equity firms are interested in buying the whole of the Nokia Siemens Network or they are interested in buying a certain stake in it.

Why Siemens wants to sell?

The shareholder agreement has been recently altered, according to which both the companies, Nokia and Siemens have the right to do what they want with their stake and the other company cannot veto. Siemens is looking forward to find some potential buyers after this amendment.

The German company holds a non-controlling stake in the joint venture. The company has been making efforts to sell out its non-core assets over the past few years. This is the reason why it wants to come out of this joint venture.

Nokia not sure

However, exiting the joint venture will not be as good for Nokia Corporation because the company holds the controlling stake in the joint venture, which is in the process of turnaround at present, says a report from Forbes.

Nokia is experiencing declining sales of its smartphones, and in such case the joint venture has been the only positive spot for the company. The Nokia Siemens network (NSN) joint venture has been a profitable business and has generated cash for six straight quarters due to the restructuring process and transformation to 4G LTE.

The Finnish phone maker is trying to maintain its cash balance by avoiding paying dividends and taking headquarters on lease rather than buying it. NSN has been one of the most important segments, which have stable cash flow though it is not the core asset.

In the previous Quarter, Nokia generated cash only due to the performance of NSN. The Nokia Siemens joint venture produced more than 230 million euros in free cash flow compared to less than 90 million Euros generated by Nokia Group.

Nokia Siemens Network turnaround may help

There are strong possibilities that Nokia Siemens network will generate stable profits. The restructuring of the Nokia Siemens Network in the previous year has benefited this joint venture a lot and has also assisted in increasing the operating margins.

Reorganizing the operations and slashing the jobs has also helped Nokia Siemens network. The joint venture’s target is to slash approximately 17,000 jobs and save around $1.35 billion as a part of restructuring, which was declared towards the end of 2011.

 

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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