Nokia 2010 Annual Report Download - page 39

Providing customer financing or extending payment terms to customers can be a competitive
requirement in the networks infrastructure and related services business and may have a
material adverse effect on our business, results of operations and financial condition.
Communication service providers in some markets may require their suppliers, including Nokia
Siemens Networks, to arrange, facilitate or provide financing in order to obtain sales or business.
They may also require extended payment terms. In some cases, the amounts and duration of these
financings and trade credits, and the associated impact on Nokia Siemens Networks’ working capital,
may be significant. In response to the tightening of the credit markets in 2009 and 2010, requests for
customer financing and extended payment terms have increased in volume and scope. While Nokia
Siemens Networks moderately increased the amount of financing it provided directly to its customers
in 2010, as a strategic market requirement Nokia Siemens Networks primarily arranged and
facilitated, and plans to continue to arrange and facilitate, financing to a number of customers,
typically supported by Export Credit or Guarantee Agencies. In the event that those agencies face
future constraints in their ability or willingness to provide financing to Nokia Siemens Networks’
customers, it could have a material adverse effect on our business. Nokia Siemens Networks has
agreed to extended payment terms for a number of customers, and it will continue to do so.
Extended payment terms may continue to result in a material aggregate amount of trade credits.
Even when the associated risk is mitigated by the fact that the portfolio relates to a variety of
customers, defaults in the aggregate could have a material adverse effect on us.
Nokia Siemens Networks cannot guarantee that it will be successful in arranging, facilitating or
providing needed financing, including extended payment terms to customers, particularly in difficult
financial market conditions. In addition, certain of Nokia Siemens Networks’ competitors may have
greater access to credit financing than Nokia Siemens Networks, which could adversely affect Nokia
Siemens Networks’ ability to compete successfully for business in the networks infrastructure and,
indirectly, in the related services sectors. Nokia Siemens Networks’ ability to manage its total
customer finance and trade credit exposure depends on a number of factors, including its capital
structure, market conditions affecting its customers, the level and terms of credit available to Nokia
Siemens Networks and to its customers, the cooperation of the Export Credit or Guarantee Agencies
and its ability to mitigate exposure on acceptable terms. Nokia Siemens Networks may not be
successful in managing the challenges associated with the customer financing and trade credit
exposure that it may have from time to time. While defaults under financings and trade credits to
Nokia Siemens Networks’ customers resulting in impairment charges and credit losses have not been
a significant factor for us, these may increase in the future. See “Item 5B. “Liquidity and Capital
Resources—Structured Finance,” and Note 35(b) to our consolidated financial statements included in
Item 18 of this annual report for a more detailed discussion of issues relating to customer financing,
trade credits and related commercial credit risk.
Some of the Siemens carrierrelated operations transferred to Nokia Siemens Networks have
been and continue to be the subject of various criminal and other governmental
investigations related to whether certain transactions and payments arranged by some
current or former employees of Siemens were unlawful. As a result of those investigations,
government authorities and others have taken and may take further actions against Siemens
and/or its employees that may involve and affect the assets and employees transferred by
Siemens to Nokia Siemens Networks, or there may be undetected additional violations that
may have occurred prior to the transfer or violations that may have occurred after the transfer
of such assets and employees.
Public prosecutors and other government authorities in several jurisdictions have been conducting
and in some jurisdictions are continuing to conduct criminal and other investigations with respect to
whether certain transactions and payments arranged by some current or former employees of
Siemens relating to the carrierrelated operations for fixed and mobile networks that were transferred
to Nokia Siemens Networks were unlawful. These investigations are part of substantial transactions
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