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

Trade Secret Dispute Settled Clears Sale of Motorola Networks to NSN:

The settlement of the legal dispute between Motorola and Huawei paves the way for Motorola to complete the sale of its network equipment business to Nokia Siemens Networks (NSN). The acquisition, which had originally been expected to be completed late last year, was delayed by a lawsuit from Huawei, claiming that the deal would result in its trade secrets being transferred to NSN, which is a key rival. Motorola had countersued with its own allegations of trade secrets theft. Motorola will pay Huawei a one-time fee, and the Chinese giant will allow NSN to access the information required to service any Huawei-made networks Motorola has in the market. The revised date for finalizing the takeover is April 29th – over nine months after it was first announced.

With the integration of Motorola Networks, NSN may be able to expand its business in the US and Japan. Note that last year, NSN lost out to Ericsson in the bid to buy Nortel- which had a much larger presence in the U.S. market.

NSN Shopping for a Buyer:

While Nokia Siemens Networks can now finally complete its acquisition of Motorola’s networking business, reports have surfaced that its two parent companies want to sell a stake in NSN, which could even amount to as much as 51% ownership.

According to the WSJ, Nokia Siemens is talking with at least five private equity firms about selling a 30 percent stake in NSN for as much as $1 billion, These include TPG Inc, Bain Capital, the Blackstone Group, Gores Group LLC and Kohlberg Kravis Roberts & Co. Private equity firms have been talking to NSN since at least August, but the WSJ reports they’re being scared off by NSN’s pension obligation, which is probably in the billions of dollars.

“Our parent companies have stated their commitment to Nokia Siemens Networks, whilst exploring the possibility of private equity taking a stake in the company. Any other scenarios are purely speculative,” an NSN spokesman told the WSJ, while Nokia’s CFO, Timo Ihamuotila, denied any discussions about selling NSN off entirely. And there are many obstacles to any deal, such as its structuring and an outstanding pension obligation that could amount to billions of dollars according to some analysts. NSN employs over 66,000 people.

Despite expanded its managed network services business, NSN gets only 6% of its revenue from the North American region, compared to 36% at Alcatel-Lucent. The company has been pressured in emerging markets by Huawei and ZTE. It is also lagging its rival network equipment companies in LTE deployments, content to focus on 3G and HSPA.

TelCell Selects NSN for wireless network infrastructure upgrade:

NSN has been selected by TelCell (a mobile services arm of St.Maarten -Caribbean based TelEm), to provide complete network infrastructure equipment and related turnkey services. Under the agreement, Nokia Siemens Networks will provide radio equipment including its Flexi Multiradio Base Stations, core network, Flexi NG (Network Gateway), which manages the mobility of smart devices and connectivity to the applications used by TelCell subscribers. Nokia Siemens Networks said that the mobile softswitches and media gateways will save up to 70% of the current operational costs for the operator. The agreement also includes Gateway GPRS Support Node (GGSN) and Serving GPRS Support Node (SGSN).

Nokia Siemens Networks Caribbean business development director Michael Jakob said 3G and particularly HSPA not only introduces a new mobile broadband experience for subscribers, but also opens up new revenue streams for the operator.

Comment:

NSN’s failure to turn a profit since it’s creation in 2007 illustrates (yet again) that many telecom & Internet company mergers turn out to not live up to their lofty expectations. Other failures include Alcatel-Lucent and Time Warner- AOL.

In an earlier article titled: Huawei, ZTE and Ericsson to Dominate Telecom Infrastructure Equipment Market we didn’t include NSN (or Alcatel-Lucent) in the top tier of network equipment vendors, despite their experience in providing telecom infrastructure equipment to telcos.

In our opinion, NSN has to emphasize managed services and upgrade their LTE product portfolio in order to successfuly compete with Ericsson, Huawei and ZTE in global telecom markets.

0 thoughts on “NSN in Talks to Sell Majority Stake after Motorola & Huawei Settle Dispute

  1. Thanks for an insightful and informative article. I had no idea that NSN was no longer in the top tier of telecom equipment vendors and their parent companies were entertaining offers to sell such a large stake in the company. Amazing that since 2007, they’ve been eclipsed by Huawei and ZTE!

  2. Will NSN survive as a viable entity? How many years can you continue to lose money before shutting down?

    Seems like we are still in a nuclear winter or death zone for telecom network infrastructure companies. Many big names have vanished, e.g. GEC Plessey (UK), Nortel (Canada) while Lucent/ATT Bell Labs doesn’t exist as an idependent entity.

    After many acquisitions in late 1990s and ealry this decade, Cisco has all but given up on network infrastructure, with the exception of Ethernet switches and IP routers. Small to medium size companies are struggling. Is this a never ending story?

    1. During telecom bubble busrt in 2000..Nokia Network had its opportunity to be #1 in telecom infrastructure business :-)! Don’t you all remember?

      1. There were so many loud telecom infrastructure players in 2000, I can’t say Nokia really stood out from that crowd.

        Cisco and Intel tried to get into that apparently enticing market, but both failed badly. Nortel, which looked like a sure winner with its long haul fiber business ended up demolished after the bubble burst. Lucent has been a big drain on Alcatel and doesn’t seem to have added materially to the combined company’s product portfolio. And now we have NSN on the ropes four years after its highly touted formation in 2007.

        It’s been a total wipeout of the big players, with exception of Ericsson!

  3. Efficient market theorom is for real

    Nothing can survive the whole life on steroids

    So is NSN which is on Oxeygen supplied by Nokia Oy and Siemens AG since it was born in 2007

  4. Nokia Network messed up well in 02-03 with ATT W. Now NSN has no success formula except bying other business. Even with taking over Mot Network. They need more adequate brass to do it.

    1. Thanks for your comment. Do you think its NSN’s management that’s led them astray or could it be market dynamics or different corporate cultures?

      Note that Siemens sold its mobile phone division after failing in that market, while Nokia was a leader in mobile phones till the iPhone (and other smart phones, e.g. from HTC) appeared on the scene. Yet the combined entity has not made money in either the wireless or wireline equipment business

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