Nokia 2012 Annual Report Download - page 45

result of this trend and the intense competition in the industry, Nokia Siemens Networks may be
required to provide contract terms increasingly favorable to the customer to remain competitive. Any
unfavorable developments in relation to or any change in the contract terms applicable to a major
customer may have a material adverse effect on our business, results of operations and financial
condition.
Nokia Siemens Networks mobile broadband infrastructure and related services business is
dependent on large multi-year contracts.
Large multi-year contracts, which are typical in the mobile broadband infrastructure and related
services business, include a risk that the timing of sales and results of operations associated with
those contracts will differ from what was expected when the contracts were entered into. Moreover,
such contracts often require the dedication of substantial amounts of working capital and other
resources, which may negatively affect our cash flow, particularly in the early stages of a contract, or
may require Nokia Siemens Networks to sell products and services in the future that would otherwise
be discontinued, thereby diverting resources from developing more profitable or strategically important
products and services. Any non-performance by us under those contracts may have a material adverse
effect on Nokia Siemens Networks because mobile operators have demanded and may continue to
demand stringent contract undertakings, such as penalties for contract violations.
Nokia Siemens Networks’ liquidity and its ability to meet its working capital requirements
depend on access to available credit under its financing arrangements and other credit lines as
well as cash at hand. If those sources of liquidity were to be unavailable, or cannot be
refinanced when they mature, this could have a material adverse effect on our business, results
of operations and financial condition.
To provide liquidity and meet working capital requirements, Nokia Siemens Networks is party to certain
financing arrangements and has arranged for other committed and uncommitted credit lines. Nokia
Siemens Networks’ ability to draw upon those resources is dependent upon a variety of factors,
including compliance with existing covenants, the absence of any event of default and, with respect to
uncommitted credit lines, the lenders’ perception of its credit quality. The implementation of Nokia
Siemens Networks’ strategy and ongoing restructuring plan has resulted in costs, cash outflows and
charges. These have had and will continue to have a negative effect on its liquidity position and may
be greater than currently estimated. The financial covenants under Nokia Siemens Networks’ existing
credit facilities require it, among other things, not to exceed certain leverage ratios and to maintain
certain interest coverage ratios. Nokia Siemens Networks’ ability to satisfy these and other existing
covenants may be affected by events beyond its control and there can be no assurance that it will be
able to comply with its existing covenants in the future. Any failure to comply with the covenants under
any of its existing credit facilities may constitute a default under its other credit facilities and credit lines
and may require Nokia Siemens Networks to either obtain a waiver from Nokia Siemens Networks
creditors, renegotiate credit facilities, raise additional financing from existing or new shareholders or
repay or refinance borrowings in order to avoid the consequences of a default. There can be no
assurance that Nokia Siemens Networks’ would be able to obtain such a waiver, to renegotiate credit
facilities, to raise additional financing from existing or new shareholders or to repay or refinance
borrowings on terms that are acceptable to Nokia Siemens Networks, if at all.
In addition, any failure by Nokia Siemens Networks to comply with its existing covenants, any actual or
perceived decline in its business, results of operations or financial condition or other factors may result in a
deterioration of lenders’ perception of its credit quality, which may negatively impact its ability to renegotiate
its credit facilities, refinance its borrowings or to draw upon its uncommitted credit lines. Although Nokia
Siemens Networks believes it has sufficient resources to fund its operations, if a significant number of those
sources of liquidity were to be unavailable, or cannot be refinanced when they mature, this could have a
material adverse effect on our business, results of operations and financial condition.
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