Nokia 2007 Annual Report Download - page 87

from EUR 63 million in 2005 and primarily consisted of committed financing to a network operator.
Financial guarantees given on behalf of third parties of EUR 23 million were issued during 2006.
In 2005, our total structured financing primarily consisted of the funding of the EUR 56 million 2004
financing commitment to a network operator. The committed financing in 2005 of an additional
EUR 13 million to this network did not increase our total and outstanding credit risk from
EUR 63 million, as it was available only if the outstanding loan of EUR 56 million was repaid.
See Note 35(b) to our consolidated financial statements included in Item 18 of this annual report for
further information relating to our committed and outstanding customer financing.
As a strategic market requirement, we plan to continue to provide customer financing and extended
payment terms to a small number of selected customers. 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. Should the
demand for customer finance increase in the future, we intend to further mitigate our total structured
financing exposure, market conditions permitting.
We expect our structured financing commitments to be financed mainly through cash flow from
operations as well as through the capital markets.
All structured financing commitments are available under loan facilities negotiated with customers of
Nokia Siemens Networks. Availability of the amounts is dependent upon the borrowers’ continuing
compliance with stated financial and operational covenants and compliance with other administrative
terms of the facilities. The loans are available to fund capital expenditure relating to purchase of
network infrastructure equipment and services from Nokia Siemens Networks.
The following table sets forth the amounts of our contingent commitments for the periods indicated.
The amounts represent the maximum principal amount of commitments.
Contingent Commitments Expiration Per Period
2008 20092010 20112012 Thereafter Total
(EUR millions)
Guarantees of Nokia’s performance ........... 1417 737 74 201 2429
Financial guarantees and securities pledged on
behalf of third parties .................... 128 2 — — 130
Total ................................... 1545 739 74 201 2559
Guarantees of Nokia’s performance include EUR 2 429 million of guarantees that are provided to
certain Nokia Siemens Networks customers in the form of bank guarantees, standby letters of credit
and other similar instruments. These instruments entitle the customer to claim payment as
compensation for nonperformance by Nokia of its obligations under network infrastructure supply
agreements. Depending on the nature of the instrument, compensation is payable either immediately
upon request, or subject to independent verification of nonperformance by Nokia.
Financial guarantees and securities pledged on behalf of customers represent guarantees relating to
payment by certain Nokia Siemens Networks’ customers and other third parties under specified loan
facilities between such a customer or other third parties and their creditors. Nokia’s obligations under
such guarantees are released upon the earlier of expiration of the guarantee or early payment by the
customer.
See Note 29 to our consolidated financial statements included in Item 18 of this annual report for
further information regarding commitments and contingencies.
5.C Research and Development, Patents and Licenses
Success in the mobile communications industry requires continuous introduction of new products and
solutions based on the latest available technology. This places considerable demands on our research
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