Will NSN Survive with no bidders for a stake in the venture?

The Financial Times reports that Nokia and Siemens’ desire to sell a major stake in their Nokia Siemens Networks (NSN) venture took another setback this week as private equity groups KKR and TPG have decided such a deal is not a fit for them.  The two companies decided to pass on a deal because neither could agree on price and how much control they would have over the company.  With KKR and TPG out of the running, the Gores Group and Platinum Equity are the only remaining bidding consortium for NSN.  Not surprisingly, Nokia, KKR and TPG are not commenting, other than to say “We continue to be in constructive talks with several interested parties.”

Nokia and Siemens have been searching for a bidder while NSN has struggled to make a profit.  The joint venture has been losing money for much of the time since it was formed in 2007. In the first quarter, NSN lost $157 million. Yet with €12.7bn in revenues in its last year, NSN remains one of the world’s biggest telecoms equipment makers. It recently completed the $975m acquisition of network infrastructure assets from Motorola of the US.

NSN is faced with aggressive competitors led by Huawei and ZTE of China, but also from Alcatel-Lucent  and LM Ericsson.  

Analysts said Nokia’s crisis had meant management had not concentrated on the operational problems of NSN.  “If I was running Nokia, the last management distraction I would want would be having to deal with NSN,” said Ben Uglow, analyst at Morgan Stanley. “The most logical thing to do would be to dispose of it.”

Nokia’s reluctance to act has led to growing frustration within Siemens. “NSN is bigger than some Dax companies but it is being managed as if it was a simple division within Nokia,” said one Siemens manager.

Under their original agreement, Nokia and Siemens are both tied to NSN until 2013 unless they agree to a change in ownership structure. An initial public offering is viewed as one possible option for the business after the joint venture agreement comes to an end.


“As we have said earlier, there has been unsolicited interest in NSN and we continue to be in constructive talks with multiple parties,” Nokia said in a statement on Friday. 

The news of KKR and TPG’s withdrawal comes on the heels of Nokia CEO Stephen Elop denying rumors that the company — once the undisputed global leader in mobile phones — is for sale amid speculation that its plunging market value has made it a target.


Reference:   NSN in Talks to Sell Majority Stake after Motorola & Huawei Settle Dispute


Comment: The problem NSN faces comes on top of the collapse and bankruptcy of Nortel- one of the top telecom equipment vendors of the 1980s and 1990s. Just this week, optical network player Ciena warned of a poor outlook for its business.

The NSN problems are just one more sign that the telecom industry has not recovered from the bust in the early part of this decade.  We describe the state of the industry as in a massive eco-system collapse!  Both the carriers and equipment vendors are under tremendous price pressures and continue to think more about cutting costs than expanding operations.