Nokia has agreed to lend mobile operators $2.5 billion.
Nokia has agreed to provide mobile operator Hutchison 3G UK with $652.5 million in finance. The Finnish firm also agreed to lend Orange and Mobilcom, the German operator in which Orange (France Telecom) has a 28% stake, another $1.8 billion to build out its network in the UK, France and Germany. More deals are likely to follow as Nokia looks to leverage its relatively strong balance sheet in comparison with its major competitors in order to penetrate lucrative wireless network contracts where it has had a limited presence.
Hutchison Whampoa has put together a financial package worth $5.1 billion, of which it has gained $1.1 billion in vendor financing from not just Nokia, but also NEC and Siemens for its 65% owned Hutchison 3G UK venture. Nokia will supply core network equipment with NEC and Siemens supplying essential components of the radio access network. Similarly, in France and Germany, Nokia is not the sole supplier for the construction of the 3G networks in question: in France, it must share the contract with Alcatel and its partner Fujitsu, and in Germany with Ericsson.
Nokia’s approach is an attempt to steal a march on its competitors. It is the only manufacturer with the power to raise this amount of capital at this stage, and given the cash flow difficulties currently being experienced by 3G mobile license holders, this gives Nokia the opportunity to fill the breach. Thus, timing is of the essence. Nokia can use its finance to enable the faster roll out of services, tying it more closely to operators, especially large pan-European ones (typified by its relations with Orange). This means that it is more likely to be given lucrative network management and maintenance contracts that will follow 3G deployments.
