Nokia and Siemens, the German engineering conglomerate, said they would provide €1bn in new capital and appoint a new executive chairman to their troubled telecoms equipment joint-venture.
Nokia and Siemens are each providing €500m to “further strengthen the company’s financial position and set the stage for strategic flexibility, productivity and innovation in areas such as mobile broadband and related services”.
At the same time, the companies announced that Jesper Ovesen, former chief financial officer at TDC, the Danish telecoms group, will be responsible for overseeing strategy at Nokia Siemens Networks.
The companies are striving to boost the competitiveness of NSN as a standalone entity after talks to sell a stake to private equity groups failed over the summer. NSN has rarely turned a profit since its foundation in 2007.
A capital injection would increase NSN’s attractiveness to capital market investors, a person close to the companies said. Joe Kaeser, Siemens chief financial officer, said in August that the companies would consider tapping the high-yield bond market when a suitable opportunity arose.
Olli-Pekka Kallasvuo, who resigned as chief executive of Nokia last year and until now served as non-executive chairman of NSN, is stepping down from that position. Nokia and Siemens said Mr Kallasvuo had stood down because he was unable to serve in a full time capacity.
Though relatively unknown outside his native Denmark, Mr Ovesen’s appointment was hailed as “promising” by analysts on Thursday.
“It’s a wise choice, he has the right skills set for the task,” said John Strand, of Strand Consult, a telecoms research agency.
With a background in accounting, a career as chief financial officer in Danish blue chip companies including Danske Bank, Lego and TDC, his experience encompasses financing as well as technology.
Mr Ovesen oversaw the restructuring and initial public offering of TDC. Siemens has indicated that an IPO is an option for NSN in the medium term.
Competition in the capital-intensive and low-margin network equipment industry has become fiercer during the global economic crisis as Nokia Siemens Networks, Ericsson of Sweden and China’s Huawei battle for market share.
“ Huawei’s big advantage is that it can provide infrastructure and financing in a single package,” said Mr Strand. The appointment of Mr Ovesen, he added, was a “very strong signal” that NSN will increase its focus on project finance in order to address the Chinese challenge more directly.
Get alerts on Coriant GmbH & Co. KG when a new story is published