Experts predict Siemens will leave Nokia-Siemens Networks

Business experts in Germany interviewed by Helsingin Sanomat believe that the German electronics company Siemens will sell off its share in Nokia Siemens Networks within the next two years.
      The question on their minds is no longer if Siemens will pull out of its mobile network cooperation with Nokia, but when it will do so.
      "I believe that a change in ownership will take place within two years. My assessment is that Nokia will take full control and become the sole owner.", says Dresdner Bank analyst Chris-Oliver Schickentanz.
     
A similar conclusion is drawn by WestLB analyst Thomas Langer, who believes that Nokia will buy out Siemens within two or three years.
      Nokia and Siemens merged their mobile network activities in April this year, to form Nokia Siemens Networks (NSN).
      The two sides both have 50 per cent shares of the company, but Nokia is clearly in the leading position. Nokia holds seven of the eight seats on the NSN Board of Directors, and Nokia is also able to name the CEO of NSN.
     
The owners are committed to a six-year shareholders' agreement, but analysts point out that getting out of the contract is simply a matter of negotiation.
      Peter Löscher, the new director-general of Siemens, has sharply denied any intention to sell its share in the company, but actions speak differently.
      Löscher himself resigned from the NSN board, and no permanent substitute has been found.
      The corruption scandal that has shaken Siemens has led to a major overhaul of the company's entire management structure. The changes implemented by Löscher suggest that the mobile network business is no longer seen as part of the core activities of Siemens.
     
"The structure of the joint venture is unnatural. With Nokia in charge, Siemens looks primarily like a passive investor", writes WestLB's Langer in his assessment.
      German experts say that NSN was a sensible first step for both sides, because as mobile network manufacturers, both Nokia and Siemens started to be too small alongside their competitors - primarily Ericsson and Alcatel.
      Furthermore, "rearrangements" - such as staff cuts - are less painful when enacted together. NSN plans to cut its personnel by least 9,000 employees.
      The reorganisation has cost nearly EUR one billion so far.
     
Similarly, "the next logical step is to split", say the experts interviewed by Helsingin Sanomat. In the hands of one company, it would be easier for the networks manufacturer to establish a unified corporate culture, and to strengthen its position on the world market.
      Finnish analysts say nevertheless that the joint venture will last for a while at least.
      "The sector is at its lowest point, and it is beneficial for Nokia that Siemens should bear part of the costs of the cutbacks. But it is another matter if the six-year contract period will be seen through", says Karri Rinta of Handelsbanken.
     
The focus of Nokia investments is currently in the development of Internet services, and buying the other half of NSN is not expected to take top priority for some time.
      On the other hand, Siemens can expect a better price for its share, if and when the profitability of the network company has been raised to a reasonable level.


Previously in HS International Edition:
  Nokia Siemens Networks debuts at Barcelona 3GSM Congress (13.2.2007)
  Announcing record result, Nokia reiterates faith in Siemens deal (26.1.2007)
  Nokia and Siemens postpone merger over corruption investigation (15.12.2006)
  Nokia has high expectations for new Internet services (5.12.2007)
  Nokia Siemens Networks to lay off 300 workers (6.6.2007)
  Nokia Siemens Networks get going amid reduced market expectations (3.4.2007)