Press Release: Fitch Revises Nokia's Outlook to Positive; Affirms at 'BB'
2 hours 36 minutes ago - DJNF
The following is a press release from Fitch Ratings:
Fitch Ratings-London-17 April 2015: Fitch Ratings has revised the Outlook on Nokia Corporation's (Nokia) Long-term Issuer Default Rating (IDR) to Positive from Stable following the company's announcement that it will acquire Alcatel-Lucent in an all share offer. Fitch has affirmed Nokia's IDR and senior unsecured rating at 'BB'.
The revision of the Outlook to Positive reflects Fitch's view that the acquisition of Alactel-Lucent has strong industrial logic and potential to significantly improve Nokia's operating and medium- to long-term business risk profile, while alleviating mounting risks to its predominantly wireless networks focus. The rating incorporates a degree of cautiousness relating to potential integration and execution risks but recognises management's strong operational track record in recent years.
KEY RATING DRIVERS
- Improved Operational Profile
- Fitch believes that the Alacatel-Lucent acquisition will improve Nokia's operating profile as a result of greater scale, improved customer reach, R&D cost amortisation, greater innovation scope, a broader product portfolio and potentially stronger margins through cost reduction. Fitch believes that the combined entity will be better positioned to compete in a rapidly changing industry where scale, innovation and customer reach will be key to growing and maintaining market share. The acquisition will also improve competitive dynamics in certain key geographies such as the US, where the Chinese manufacturers (Huawei and ZTE) have a lesser presence and where Nokia and Alcatel-Lucent both compete today.
Cost Reduction Potential
- Nokia envisages that the Alcatel-Lucent acquisition will yield annual operational cost savings of EUR900m by 2019 with associated one-off integration and restructuring costs of EUR900m. Nokia estimates that on a pro-forma basis, the reduced costs would improve the 2014 margins of the combined entity to 12% from 8.7%. The main areas of synergies include product and service overlap, sales force optimisation, supply chain and procurement and overhead costs.
Alleviating Mounting Risk of Wireless Only
- In recent times, Nokia has been performing well operationally, having restructured its business to focus on profitable, wireless networks business and divesting out of the consumer handset business. However, there was only so much that Nokia could achieve with its existing product portfolio and footprint on a standalone basis. In time, the risks to Nokia's wireless network only focus and strategy would have mounted: a potential slowdown in the sale of 4G equipment as mobile operators complete LTE roll out, greater convergence in fixed and mobile networks and IP and cloud services where Nokia might have struggled in the long run. The increased scale from the acquisition and broader product portfolio of Alacatel-Lucent will help alleviate this risk and position the combined entity to better address industry changes.
Execution Risks
- In the short term, the acquisition will be dilutive to Nokia from an operating and cash flow margin perspective. Nokia will also have to manage significant integration and execution risk with costs most likely to be front-loaded. While the restructuring risks and dilution are important factors for Nokia's rating, Fitch believes Nokia's management team has a successful track record in restructuring its own business in recent times while maintaining top line performance.
Financial Structure to be Confirmed
- Nokia has yet to confirm its financial structure and optimisation plan post acquisition. The company has stopped its share buyback programme and estimates EUR7.4bn in net cash (including the conversion of both Nokia and Alcatel Lucent's mandatory convertible bonds) at the end of 2014. Fitch views a significant net cash holding position as key for Nokia's rating given the company's business risk. Nokia also envisages EUR200m of lower interest charges following a proactive strategy of debt reduction. The company has reiterated its long-term target of achieving an investment grade rating.
KEY ASSUMPTIONS
- - No deterioration in Alcatel-Lucent's performance prior to closing. The company continues to achieve its EUR300m cost saving target from the Shift programme in 2015.
- - Nokia Networks Division to maintain operating margin above 10% from 2015.
- - Integration costs of EUR900m, with 50% incurred in 2016 and 50% in 2017 yielding cost savings of EUR600m by 2019 (two-thirds of management target of EUR900m).
- - Full conversion of Nokia and Alcatel-Lucent's convertible bonds.
- - Suspension of the share repurchase programme and continuation of a modest dividend policy.
RATING SENSITIVITIES
- Positive: Future developments that could lead to positive rating action include:
- - No significant regulatory remedies that would affect the operational profile and cost reduction potential of the combined entity.
- - Evidence that the integration programme with Acatel-Lucent is on track, along with no deterioration in Alcatel-Lucent's performance and cost-saving targets.
- - A conservative financial structure post acquisition with sustained net cash in the multiple billion range.
- - Non-IFRS EBIT margins at the group level consistently in the mid-single digit range or above, subject to healthy revenue and cash flow visibility.
- - Modest positive FCF (post dividend).
Negative: Future developments that could lead to negative rating action include:
- - A deterioration in operating performance at either at Nokia or Alcatel-Lucent and/or sustained delays or increase in cost of the integration programme.
- - Low single digit group (non IFRS) EBIT margin.
- - Consistently neutral pre-dividend FCF.
- - Declining net cash position driven by negative cash flows.
Contact:
- Principal Analyst
- Jonathan Levy
- Analyst
- +44 20 3530 1701
Supervisory Analyst
- Tajesh Tailor
- Director
- +44 20 3530 1726
- Fitch Ratings Limited
- 30 North Colonnade
- London E14 5GN
Committee Chairperson
- Nikolai Lukashevich
- Senior Director
- +7 495 956 9968
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available on www.fitchratings.com. For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary.
Applicable criteria, 'Corporate Rating Methodology', dated 28 May 2014, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
- Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
- http://www.fitchratings.com/creditdesk/report..._id=749393
Additional Disclosure
- Solicitation Status
- http://www.fitchratings.com/gws/en/disclosure..._id=983123
- ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
(END) Dow Jones Newswires
April 17, 2015 05:25 ET (09:25 GMT)
2 hours 36 minutes ago - DJNF
The following is a press release from Fitch Ratings:
Fitch Ratings-London-17 April 2015: Fitch Ratings has revised the Outlook on Nokia Corporation's (Nokia) Long-term Issuer Default Rating (IDR) to Positive from Stable following the company's announcement that it will acquire Alcatel-Lucent in an all share offer. Fitch has affirmed Nokia's IDR and senior unsecured rating at 'BB'.
The revision of the Outlook to Positive reflects Fitch's view that the acquisition of Alactel-Lucent has strong industrial logic and potential to significantly improve Nokia's operating and medium- to long-term business risk profile, while alleviating mounting risks to its predominantly wireless networks focus. The rating incorporates a degree of cautiousness relating to potential integration and execution risks but recognises management's strong operational track record in recent years.
KEY RATING DRIVERS
- Improved Operational Profile
- Fitch believes that the Alacatel-Lucent acquisition will improve Nokia's operating profile as a result of greater scale, improved customer reach, R&D cost amortisation, greater innovation scope, a broader product portfolio and potentially stronger margins through cost reduction. Fitch believes that the combined entity will be better positioned to compete in a rapidly changing industry where scale, innovation and customer reach will be key to growing and maintaining market share. The acquisition will also improve competitive dynamics in certain key geographies such as the US, where the Chinese manufacturers (Huawei and ZTE) have a lesser presence and where Nokia and Alcatel-Lucent both compete today.
Cost Reduction Potential
- Nokia envisages that the Alcatel-Lucent acquisition will yield annual operational cost savings of EUR900m by 2019 with associated one-off integration and restructuring costs of EUR900m. Nokia estimates that on a pro-forma basis, the reduced costs would improve the 2014 margins of the combined entity to 12% from 8.7%. The main areas of synergies include product and service overlap, sales force optimisation, supply chain and procurement and overhead costs.
Alleviating Mounting Risk of Wireless Only
- In recent times, Nokia has been performing well operationally, having restructured its business to focus on profitable, wireless networks business and divesting out of the consumer handset business. However, there was only so much that Nokia could achieve with its existing product portfolio and footprint on a standalone basis. In time, the risks to Nokia's wireless network only focus and strategy would have mounted: a potential slowdown in the sale of 4G equipment as mobile operators complete LTE roll out, greater convergence in fixed and mobile networks and IP and cloud services where Nokia might have struggled in the long run. The increased scale from the acquisition and broader product portfolio of Alacatel-Lucent will help alleviate this risk and position the combined entity to better address industry changes.
Execution Risks
- In the short term, the acquisition will be dilutive to Nokia from an operating and cash flow margin perspective. Nokia will also have to manage significant integration and execution risk with costs most likely to be front-loaded. While the restructuring risks and dilution are important factors for Nokia's rating, Fitch believes Nokia's management team has a successful track record in restructuring its own business in recent times while maintaining top line performance.
Financial Structure to be Confirmed
- Nokia has yet to confirm its financial structure and optimisation plan post acquisition. The company has stopped its share buyback programme and estimates EUR7.4bn in net cash (including the conversion of both Nokia and Alcatel Lucent's mandatory convertible bonds) at the end of 2014. Fitch views a significant net cash holding position as key for Nokia's rating given the company's business risk. Nokia also envisages EUR200m of lower interest charges following a proactive strategy of debt reduction. The company has reiterated its long-term target of achieving an investment grade rating.
KEY ASSUMPTIONS
- - No deterioration in Alcatel-Lucent's performance prior to closing. The company continues to achieve its EUR300m cost saving target from the Shift programme in 2015.
- - Nokia Networks Division to maintain operating margin above 10% from 2015.
- - Integration costs of EUR900m, with 50% incurred in 2016 and 50% in 2017 yielding cost savings of EUR600m by 2019 (two-thirds of management target of EUR900m).
- - Full conversion of Nokia and Alcatel-Lucent's convertible bonds.
- - Suspension of the share repurchase programme and continuation of a modest dividend policy.
RATING SENSITIVITIES
- Positive: Future developments that could lead to positive rating action include:
- - No significant regulatory remedies that would affect the operational profile and cost reduction potential of the combined entity.
- - Evidence that the integration programme with Acatel-Lucent is on track, along with no deterioration in Alcatel-Lucent's performance and cost-saving targets.
- - A conservative financial structure post acquisition with sustained net cash in the multiple billion range.
- - Non-IFRS EBIT margins at the group level consistently in the mid-single digit range or above, subject to healthy revenue and cash flow visibility.
- - Modest positive FCF (post dividend).
Negative: Future developments that could lead to negative rating action include:
- - A deterioration in operating performance at either at Nokia or Alcatel-Lucent and/or sustained delays or increase in cost of the integration programme.
- - Low single digit group (non IFRS) EBIT margin.
- - Consistently neutral pre-dividend FCF.
- - Declining net cash position driven by negative cash flows.
Contact:
- Principal Analyst
- Jonathan Levy
- Analyst
- +44 20 3530 1701
Supervisory Analyst
- Tajesh Tailor
- Director
- +44 20 3530 1726
- Fitch Ratings Limited
- 30 North Colonnade
- London E14 5GN
Committee Chairperson
- Nikolai Lukashevich
- Senior Director
- +7 495 956 9968
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available on www.fitchratings.com. For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary.
Applicable criteria, 'Corporate Rating Methodology', dated 28 May 2014, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
- Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
- http://www.fitchratings.com/creditdesk/report..._id=749393
Additional Disclosure
- Solicitation Status
- http://www.fitchratings.com/gws/en/disclosure..._id=983123
- ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
(END) Dow Jones Newswires
April 17, 2015 05:25 ET (09:25 GMT)
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Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'
NASDAQ DIP and RIP
Here is the best word that describes what i do here.
Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'
