News

Arrests for 'bribery' foil Siemens-Nokia merger for some months

"Several former and current Siemens managers have been arrested by German prosecutors on charges of setting up secret and phony bank accounts." It's not what you expect to read when researching a merger between Siemens and Nokia, but that's what is happening.

According to Dave Gardner, the corruption investigations have widened since first reports, six months ago, to the point where the establishment of Nokia Siemens Networks in January has had to be postponed.

A joint press release from the two companies said: "Nokia Siemens Networks is now expected to start operations in the first quarter 2007, instead of January 2007 as previously expected."

Ironically, Bloomberg quoted Siemens spokesman Peik von Bestenbostel saying that the delay is a "reasonable measure" as both companies want the joint venture to start with a "clear compliance structure." He declined to comment on the potential financial effect of the delay. Even more ironically, Bloomberg reporter Benedikt Kammel says that shares of Nokia have lost 0.8 percent since the combination was announced, while Siemens shares have gained 18 percent.

The venture will have an estimated 20% of the global wireless-phone equipment market, which may grow 8.8% next year. That's still substantially less than the 26% estimated for Ericsson by Credit Suisse Group in June.

Investigations have got well beyond the "interviews" stage, said the Wall Street Journal, quoting German police official saying that Thomas Ganswindt [above, right] a former senior executive, has been arrested. "He was a member of Siemens's corporate executive committee, where he was responsible for its telecommunications-equipment unit, before resigning in September," said the WSJ report, going on to add that a spokesman at Luxembourg-based Elster Group, where Mr. Ganswindt has taken the post of chief executive since his resignation from Siemens in September, has said he was unavailable and declined to comment.