Nokia is buying out Siemens’s stake in their 50-50 telecoms equipment joint venture, Nokia Siemens Networks, for $1.7 billion ($2.2 billion). The move will give Nokia full control of a business that could survive even if Nokia’s mobile phone business passes on – and will also see Siemens exit a networking game in which it has played since 1847.
The markets have responded positively to the deal, with Nokia’s shares opening 9.7 percent up in Monday’s trading on the Helsinki Stock Exchange. According to a Nokia statement, the Finnish firm will pay the German company €1.2 billion in cash when the transaction closes in the third quarter – assuming that regulators clear the deal. A further €500 million will also change hands through a secured loan from Siemens, to be paid back a year later.
Nokia Siemens Networks (NSN) has been around since 2007. The joint venture is not quite at the top of its game — it’s around fourth place, well behind leaders Huawei and Ericsson and just behind Alcatel-Lucent – but it has managed to be profitable for the last four consecutive quarters thanks to restructuring. As far as Nokia is concerned, that makes it a bright spot on the company’s books.
The question now is what Nokia will do with the mobile broadband technology and services operation, which will change its name to reflect Siemens’s departure. Nokia Networks, or whatever it will be called, will be a wholly-owned subsidiary. Nokia said it will “continue to strengthen the company as a more independent entity”, which may suggest a search for a buyer at some point down the road.
Here’s what Nokia chief Stephen Elop said this morning:
“With its clear strategic focus and strong leadership team, Nokia Siemens Networks has structurally improved its operational and financial performance. Furthermore, Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity. Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group.”
Although the company will stay headquartered in Nokia’s Espoo stronghold, it will retain its German presence. The current management and governance structure will also remain unchanged.
Siemens has been involved in telecoms, in one form or another, for a good 166 years. Siemens & Halske, which was founded back in 1847, was responsible for building one of the first telegraph lines in Europe (from Berlin to Frankfurt), before diversifying into electric streetcars and other areas.