Nokia Siemens Selling Bonds as Shareholders Consider Options

Nokia Siemens Networks is selling 600 million euros ($779 million) of bonds and published a detailed list of assets and liabilities, as Nokia Oyj and Siemens AG seek to make the venture more independent.

The phone-equipment maker plans to use the proceeds from the sale of five-year and seven-year senior notes to repay debt, the Espoo, Finland-based venture said today. It also listed cash and equivalents of 2.42 billion euros at the end of 2012 and total loans and borrowings of 1.13 billion euros.

Nokia and Siemens are considering options for the six-year-old partnership, with Siemens pushing for an exit. Talks about the future of the unit, which competes with Ericsson AB and Alcatel-Lucent SA as well as Asian suppliers Huawei Technologies Co. and ZTE Corp., have accelerated as a shareholder agreement comes up for renewal in April, people familiar with the matter said last month.

“We continue to focus on building a strong and sustainable business, with the right capital structure for the future,” Nokia Siemens Chief Financial Officer Samih Elhage said in an e-mail.

One scenario under discussion is a joint buyout of Munich-based Siemens’s 50 percent stake by Nokia and a strategic partner, people familiar with the situation said last month. The parents abandoned talks with private-equity buyers in 2011 over a sale of the business as the buyout firms failed to come up with a compelling offer.

Job Cuts

A change in Nokia Siemens’s ownership structure would mark another development for a turbulent industry. Competition from Asian rivals Huawei and ZTE has forced Nokia Siemens and its Western rivals to cut jobs, and one-time giant Nortel Networks Corp. went bankrupt in 2009.

Last month, Alcatel-Lucent SA named Vodafone Group Plc executive Michel Combes as CEO to replace Ben Verwaayen, who stepped down after his three-year turnaround plan failed.

Siemens added 0.7 percent to 84.06 euros at the close of trading in Frankfurt. Nokia was little changed at 2.58 euros in Helsinki.

The five-year bonds being offered won’t be redeemable for two years, while the seven-year notes are non-callable for three years.

Bright Spot

Unprofitable until early last year, Nokia Siemens’s recent earnings improvements have made it a relative bright spot for Nokia. The venture’s fourth-quarter operating profit was 14.4 percent of sales, excluding some items. For the Nokia division making mobile devices such as the Lumia smartphone, that margin was 1.3 percent. The network venture’s quarterly sales of 3.99 billion euros made it Nokia’s biggest and only growing division.

Still, the net loss attributable to the shareholders amounted to 1.46 billion euros last year, compared with a loss of 710 million euros for 2011, Nokia Siemens said today.

Nokia Siemens accounts for about 83 percent of Nokia’s market value, Maynard Um, an analyst at Wells Fargo Securities, said in a note today. He values Nokia Siemens at 0.6 times annual sales and the remainder of Nokia at 0.2 times sales. Nokia’s market value is about 9.7 billion euros.

Nokia Siemens, which in 2011 announced plans to eliminate 17,000 jobs, is on track to exceed its target of saving 1 billion euros in operating expenses by the end of this year, Nokia Siemens Chief Executive Officer Rajeev Suri said last month. The company aims to seize growth opportunities when the market is growing and focus on improving margins where industry revenue doesn’t increase, he said.

The company, which has sold assets to refocus on wireless infrastructure, is also trying to boost its services business.

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