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Buh-bye Siemens: Nokia to splash €1.7bn turning NSN into N

Co-owned infrastructure biz actually makes money

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Nokia is buying out its network partner Siemens, for €1.2bn in cash plus a half-a-billion loan, putting the Finnish firm in sole control of the infrastructure business.

Ownership of Nokia Siemens Networks (NSN) is split equally between the companies, and managed to turn a thin profit last year following repeated rounds of cost-cutting.

Nokia will leave management - and staff - intact and won't be slimming the business down beyond the existing plans, but it will take complete control once the transaction has completed.

NSN was set up in 2007 to help both companies compete in an increasingly commoditising market, but such arrangements are inevitably fissiparous as market conditions change.

In recent years Chinese competitors Huawei and ZTE have undercut the relaxed infrastructure oligopoly, flooding expansion markets such as Africa and India with kit priced suspiciously below what established players can offer.

Nokia's skill with radio is unmatched, in your correspondent's humble opinion, but that hasn't helped it compete with the iPhone in the mobile business. So the commoditisation of network components has made it difficult to differentiate.

The solution is to focus on cutting-edge technology, serving markets prepared to pay a premium for experience. Or, as CEO Stephen Elop puts it: "Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity".

Nokia has plenty of cash to buy out Siemens. At the end of March there was €10.1bn in readies knocking about, and €4.5bn of that isn't earmarked for anything important, so the time is right.

Those numbers are trending downwards, as the company waits for its gamble on Windows Phone to pay off, but if NSN can be kept in profit then it might even give Nokia a little more time at the table. ®

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