Nokia 2011 Annual Report Download - page 48

Recent turmoil in the financial markets may result in more customer financing requests. While the
amount of financing Nokia Siemens Networks provided directly to its customers in 2011 remained at
approximately the same level as 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 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, guarantees 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, and commercial banks may not continue to be able or
willing to provide sufficiently long-term financing, even when backed by export credit agency
guarantees, due to their own liquidity constraints. See Item 5B. “Liquidity and Capital Resources—
Structured Finance,” and Note 34(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.
Nokia Siemens Networks has used the sale of receivables to banks, other financial institutions or back
to customers to improve its liquidity, and any significant change in the ability of Nokia Siemens
Networks to continue this practice could impair its liquidity.
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 conducted and in some
jurisdictions continue to conduct criminal and other investigations related 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 and payments involving Siemens’
former Com business and other Siemens’ business groups which remain under investigation.
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