Nokia and Siemens postpone merger over corruption investigation

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Nokia and the German electronics manufacturer Siemens said on Thursday that they would postpone the merger of their mobile networks units because of an ongoing investigation into allegations of bribery at Siemens.
      Nokia Siemens Networks was to have been launched in January. Now the move has been delayed until March. Plans for the merger were announced in June.
      In its press release Nokia leaves open the possibility that the merger might be cancelled if the two companies do not reach agreement on the implications of the results of a Siemens compliance review. However, Nokia’s Chief Financial Officer Rick Simonson says that such a cancellation is very unlikely.
     
In the early part of next year Nokia plans to take part in the investigation into Siemens activities. Until now Nokia has emphasised that the bribery investigation is an internal matter for Siemens.
      According to Simonson, Nokia will be given access to all reports of outside experts hired by Siemens concerning bookkeeping and possible malfeasance.
      Siemens said this week that it had retained the services of a law office, and hired a consultant specialised in corruption to investigate the wrongdoings.
      The companies plan to negotiate an revision to the present merger contract depending on what the investigation turns up.
     
Under the present merger contract, the telephone and data networks units of Nokia and Siemens are to be merged, with ownership being split 50-50 between the two companies.
      Some analysts have said that the corruption investigation has brought down the value of Siemens Networks, and that Siemens should either pay Nokia monetary compensation, or then the ownership ratio should be changed to Nokia’s advantage.
      However, Nokia’s Simonson says that the merger contract itself would not be altered, and that the changes specifically apply to the ongoing investigation. The new company is also to get a set of ethical guidelines.
      This week Siemens said that it now has to make downward revisions of results from recent years to the tune of EUR 168 million.
      Simonson said that the moves have no bearing on the merger agreement.
     
Six months ago German police raided Siemens offices and homes of Siemens workers. Investigations into alleged corruption have been going on in Italy and Switzerland for about two years.
      According to Simonson, Nokia learned about the investigations only a month ago. He said that it came as a surprise to both Nokia and to the management of Siemens.
      Originally the investigation focused on a sum of EUR 20 million. On Monday Siemens said that the company had found EUR 420 million worth of questionable consultancy fees. Suspicions are that the money was used for bribes to help secure deals.
     
German police have arrested several former and present Siemens workers.
      So far, the highest-ranking Siemens manager to be arrested has been Thomas Ganswindt, who was responsible for network operations on the Siemens Board of Directors until September.


Previously in HS International Edition:
  Embezzlement scandal affects Nokia merger partner (21.11.2006)
  Nokia strives for dominance of network market through fusion with Siemens (20.6.2006)

Links:
  Nokia press release: Nokia Siemens Networks expected to start operations in the first quarter 2007:

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