S&P cuts Nokia rating further on Siemens venture buyout
LONDON, July 5 (IFR) - Standard & Poor's downgraded Nokia further into junk territory on Friday, warning that the Finnish telecom firm's plan to take over Siemens AG's stake in their joint network equipment venture would strain its finances.
The ratings agency downgraded the one-time tech darling by one notch to B+ from BB- citing pressure on its net cash after Nokia said on Monday it would buy Siemens's 50 percent share in Nokia Siemens Networks.
Nokia is betting on the technology to run 4G networks as it struggles in the smartphones business. But the buy-out strains a balance sheet already under pressure from a loss-making handset business, which could burn through its cash as soon as next year.
"We now anticipate Nokia's net cash could be as low as 1.3 billion euros at the end of 2013," S&P said.
The stable outlook assumes a significant reduction in cash losses and gradual market share improvement, S&P said.
In a comment on the S&P move, Nokia said its gross and net financial position remained strong, and noted it also had access to additional cash via an undrawn credit facility.
"We will continue to prudently manage our cash resources post-transaction," Nokia said on its website.
Ratings agency Fitch, with a BB- rating on Nokia, said on Monday the acquisition made strategic sense, but added that the visibility of Nokia's mobile phone business was still limited.
Moody's, meanwhile, said on Thursday the deal was credit negative for NSN because it may affect its dividend policy to help finance the acquisition at a time when its financial profile would need to stay strong to sustain its restructuring efforts.
Moody's has a B2 rating on NSN while its Ba3 rating on Nokia is on review for downgrading.
(Reporting by Natalie Harrison, IFR Markets, and Anna Ringstrom in Stockholm,; editing by Alex Chambers and Elaine Hardcastle)
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