Nokia And Siemens Scouting Suitors For A Majority Stake In NSN?

Though it may seem to be a move out of desperation, it may just be the right one especially taking corporate situations at both Nokia and Siemens into consideration. There JV-tale started back in 2007 and has since hit rough waters. It was further jolted by the recession which witnessed stalling of most of the telecom contracts globally; though all equipment manufacturers took a toll, NSN was severely impacted. On the brighter side, if NSN succeeds in selling a stake, it may just get the capital it requires to challenge heavyweights such as Ericsson, ALU and Huwaei.

Latest round of discussions with private equity firms center on a controlling share, reports indicate

Nokia Siemens may finally be able to go ahead with its acquisition of Motorola’s networking business, but even bigger question marks hang over the joint venture’s future. Once again, reports have surfaced that its two parents, both struggling with their own core market challenges, want to sell a stake, which could even be a controlling one this time around.

According to The Wall Street Journal’s sources, private equity firms are showing renewed interest in NSN, and a 51% stake in the venture could fetch about $2bn for its beleaguered owners.

Both Nokia and Siemens say they are committed to the JV until 2013, but that date is now looming closer and the firm still does not make a profit. The company has had a rocky ride since it began operations in 2007, rather ominously on April 1 – and that came after delays in finalizing the deal, which have become a hallmark of the firm’s progress.

It has a powerful W-CDMA installed base and strong offerings such as its Flexi families of software defined base stations plus backhaul, and it has been building up its services business. However, when it was gazumped in its bid for Nortel’s key wireless assets by Ericsson, one of its biggest weaknesses was exposed – its poor showing in north America, where 4G roll-out has kicked off. The purchase of Motorola Networks will help a little, but NSN gets only 6% of its revenue from the region, compared to 36% at Alcatel-Lucent. In emerging markets it is squeezed by the scale and financing capabilities of the two Chinese majors and Ericsson, and in LTE it has so far seen less momentum than some of its rivals.

Last summer, NSN had conversations with private equity firms including Gores Group, KKR, TPG and Blackstone Group, which apparently revolved around selling a minority stake of up to 30%, in return for at least $1bn in cash. Now the focus may have changed to a majority stake, but for a higher relative price. Most observers believe the purchaser would be a finance firm, not a rival vendor, though this would not be impossible.

“Our parent companies have stated their commitment to Nokia Siemens Networks, whilst exploring the possibility of private equity taking a stake in the company. Any other scenarios are purely speculative,” an NSN spokesman told the WSJ, while Nokia’s CFO, Timo Ihamuotila, denied any discussions about selling NSN off entirely. And there are many obstacles to any deal, such as its structuring and an outstanding pension obligation that could amount to billions of dollars according to some analysts. NSN employs over 66,000 people.

Source: Rethink Wireless


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