Nokia 2004 Annual Report Download - page 75

Customer Financing
Network operators in some markets sometimes require their suppliers, including us, to arrange or
provide long-term financing as a condition to obtaining or bidding on infrastructure projects.
Customer financing continues to be requested by some operators in some markets, but to a
considerably lesser extent and with considerably lower importance than during the past years.
Extended payment terms may continue to result in a material aggregate amount of trade credits,
but the associated risk is mitigated by the fact that the portfolio relates to a variety of customers.
See ‘‘Item 3.D Risk Factors—Customer financing to network operators can be a competitive
requirement and could affect our sales, results of operations, balance sheet and cash flow
adversely.’’
The following table sets forth Nokia’s total customer financing, outstanding and committed, for the
years indicated.
Customer Financing
At December 31,
2004 2003 2002
(EUR millions)
Financing commitments ....................................... 56 490 857
Outstanding long-term loans, net of allowances and write-offs ......... — 354 1 056
Outstanding financial guarantees and securities pledged .............. 3 33 91
Total ....................................................... 59 877 2 004
The term customer financing portfolio at December 31, 2004 consists of outstanding and
committed customer financing. Total committed customer financing amounted to EUR 56 million,
while there were EUR 3 million of financing outstanding in a form of financial guarantees and no
financing outstanding in a form of long-term loans.
See Notes 8 and 35(b) to our consolidated financial statements included in Item 18 of this
Form 20-F for additional information relating to our committed and outstanding customer
financing.
In 2004, we reduced our total customer financing, outstanding and committed, by EUR 818 million,
or 93%, compared with 2003. Our outstanding loans have decreased mainly due to the fact that
the customer financing to Huchison 3G UK Ltd in the United Kingdom, which amounted to
EUR 653 million, was prepaid and released. The total committed customer financing to
TNL PCS S.A., or Telemar, in Brazil, which amounted to EUR 191 million, was sold off and released.
In addition, the reduction was achieved through release of outstanding guarantees as well as
arrangements with banks, financial institutions and Export Credit Agencies, and mutual agreement
with the borrower. Our continued intent is to further mitigate our total customer financing
exposure, market conditions permitting. We continue to make arrangements with financial
institutions and investors to sell credit risk we have incurred from the commitments and
outstanding loans we have made as well as from the financial guarantees we have given.
In 2003, our outstanding loans decreased by 1 127 million mainly due to the fact that the
MobilCom loan was exchanged for subordinated convertible perpetual bonds of France Telecom.
These bonds were treated as available-for-sale investments.
In 2002, we recorded a net charge of EUR 265 million to write down the loans receivable to their
estimated recoverable amount and to write off various other amounts related to MobilCom.
However, this charge was substantially reversed in 2003 by EUR 226 million as a result of the
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