Nokia CEO Stephen Elop believes NSN's leadership position in LTE provides an attractive growth opportunity for the firm

Nokia takes full control of network equipment venture

Nokia has announced plans to buy out Siemens' 50 per cent share of their network equipment joint venture Nokia Siemens Networks.

Nokia will gain full control of the profitable venture for $2.2bn, a cheaper-than-expected price, analysts said, as it bets on the technology to run 4G networks after having stumbled as a maker of smartphones.

The joint venture was established in 2007, combining Nokia's Networks Business Group and Siemens' carrier-related operations for fixed and mobile networks, become a leading provider of telecommunications infrastructure in more than 150 countries.

"With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones," Bernstein analyst Pierre Ferragu wrote in a note to clients.

The cost to the balance sheet is still a risk for a company that is still burning through cash to keep its handset business running, but the deal is good news for the German firm allowing it to finally execute a plan to exit a business that had weighed on it with high restructuring costs.

Morgan Stanley said the price Siemens would receive for its stake was at the lower end of estimates, "however, in our view, the far more impactful point is that Siemens has managed to get this done".

Nokia's future has been cloudy since it fell behind rivals Apple and Samsung in the smartphone race after making the decision to switch to Microsoft's untried Windows software in 2011.

In contrast to Nokia's phone business, NSN turned profitable in the second quarter of 2012 after slashing costs and as its focus on fourth-generation Long Term Evolution (LTE) networks began to pay off.

"With its clear strategic focus and strong leadership team, NSN has structurally improved its operational and financial performance,” said Nokia CEO Stephen Elop in a statement.

“NSN has established a clear leadership position in LTE, which provides an attractive growth opportunity.”

Siemens has made no secret of its desire to exit NSN, having said often that the telecoms market is a tough one to be in, whether as an operator or as an equipment maker.

"With this transaction, we continue our efforts to strengthen our focus on Siemens' core areas of energy management, industry and infrastructure, as well as healthcare,” said Siemen’s Chief Financial Officer Joe Kaeser.

“The full acquisition of NSN by Nokia offers an attractive opportunity to actively shape the telecom equipment market for the future and create sustainable value."

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