Zacks_Analysts' Blog : NSN Obtains Parent Funds - Analyst Blog

Nokia Siemens Networks (NSN), a 50-50 joint venture between Nokia Corp. (NOK) and Siemens AG (SI), finally received its much needed fund injection from its parent companies. Yesterday, the company announced that both Nokia and Siemens will inject Euro 500 million (approximately $683 million) each to complete the company’s proposed business restructuring plan. In August 2011, a German Newspaper Capital recently reported that NSN is also trying hard to issue a high-yield bond of Euro 2 billion in the next 3-4 months for replacing its existing credit facility, which will expire in June 2012.

On July 2011, NSN abandoned its equity disinvestment plan at least for the time being. For the last 12 months, NSN was looking for a third party investor in order to inject funds, thereby reducing the stake of both Nokia and Siemens. Two major U.S. private equity groups, Kohlberg Kravis Roberts and TPG, have backed out from their bidding for a significant stake in NSN. The departure of these two private equity groups primarily resulted from the disagreement between the firms and NSN over price and controlling stake in the venture.

The NSN management also hinted that in future, both Nokia and Siemens may consider an IPO for the company. However, several industry researchers believe an NSN IPO can take place only after properly revamping the struggling telecom infrastructure solutions provider, which may take quite some time. Ongoing global economic headwind may delay NSN’s turnaround process. Importantly, the joint venture between Nokia and Siemens will come to an end in 2013.

Despite being the second largest company in this field after LM Ericsson AB (ERIC), NSN always remain in sticky wicket once it was formed in 2007. Huawei and ZTE, the two Chinese telecom infrastructure manufacturers, are fighting neck and neck with NSN to capture the global market share. In the last couple of years, the company became marginalized in the battle field due to the introduction of more efficient and price effective equipments from Ericsson, Huawei, and ZTE.

Globally, NSN currently holds the second position with a market share of approximately 21%. Ericsson is the undisputed market leader with a 37% global share. Huawei is breathing down its neck with a market share of 18%. Recently, NSN launched an innovative product Liquid Technology, a software solution for network infrastructure that drastically reduces the need for dedicated hardware. We believe Liquid Technology is a desperate attempt by NSN to regain its lost glory in the global telecom network infrastructure equipment market.