NSN raises $1.56bn in loans for restructuring
Financing from 14 banks will help pay for massive job cuts, but vendor also announces two new contracts
Published: 23 January, 2012
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Having announced a radical refocusing of its business last month, Nokia Siemens has raised a loan of about €1.2bn ($1.56bn) to fund the effort, particularly the extensive program of job cuts.
According to Financial Times sources, NSN raised the money through a group of 14 European and US banks, including Bank of America, Citibank, JPMorgan, Royal Bank of Scotland and Standard Chartered. The company was reportedly hoping for €1.5bn but agreed to the lower figure in light of "market turmoil" in the eurozone. About €600m will be provided as a one-year term loan, which will then need to be replaced once it expires in summer 2013. The rest of the loan is on three-year terms.
One of the main expenses will be the cost of cutting 23% of the infrastructure vendor's workforce, or about 17,000 positions. The company aims to narrow its focus to target all its efforts at mobile broadband systems, and has already exited some sideline businesses such as WiMAX - the unit sold to NetNet Communication Technologies; fixed line broadband access, offloaded to Adtran; and microwave backhaul, now owned by DragonWave (though NSN retains a joint selling and marketing deal on that one).
NSN has struggled to achieve profitability throughout its five-year life and last year was bailed out by its parent companies to the tune of €1bn in equity - but that seemed to come with the condition that the joint venture would not seek further cash from its owners. Both Nokia and Siemens have frequently been rumoured to be looking to exit the JV, but last year they failed to finalize a deal with private equity players.
In better news for NSN, it has announced two flagship contracts for the mobile broadband and services businesses on which it has now staked its future. It has won a deal to supply Korea Telecom with part of its LTE network, providing its Flexi Multiradio base stations for a deployment in refarmed 1.8GHz spectrum, as well as integration and its NetAct operations support system.
And India's largest cellco by subscribers, Bharti Airtel, has extended an existing managed services deal with NSN with an additional five-year contract covering Bharti's 3G, GSM and enterprise WAN networks in eight operating circles - Bihar, Calcutta, Gujarat, Maharashtra, Madhya Pradesh, Mumbai, Orissa and West Bengal.
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