NSN Form 2013 PDF

Notes to the Consolidated Financial Statements
Enabling a mobile world

Annual Report 2012
4 Nokia Siemens Networks
Overview
1 2 Enabling a mobile world A word from our customer: U.S. Cellular 4 Who we are and what we do 6 2012 highlights 8 A letter from our Chairman 9 Our Board of Directors 10 A word from our customer: SoftBank
Business review
12 Chief Executive Ofcers strategic review 16 Our senior management team 18 Our strategy and transformation 21 A word from our customer: SK Telecom 22 Industry trends 24 How we operate 26 Where we operate 28 A word from our customer: KDDI 29 Operating and Financial Review 47 A word from our customer: TeliaSonera 48 Corporate responsibility 50 Risk factors 52 A word from our customer: Safaricom
Governance
54 Corporate Governance
Financial Statements Consolidated Financial Statements 2012
62 Consolidated Income Statement 63 Consolidated Statement ofComprehensive Income 64 Consolidated Statement ofFinancial Position 65 Consolidated Statement ofCash Flows 66 Consolidated Statement ofChanges in Shareholders Equity 67 Notes to the Consolidated Financial Statements
Company Financial Statements2012
118 Company Statement ofFinancial Position 119 Company Income Statement 120 Notes to the Company Financial Statements
Other Information
127 Proposed prot appropriation 127 Proposed appropriation ofresult 127 Subsequent events 128 Independent auditors report 129 Glossary
Visit our Annual Report online nokiasiemensnetworks.com/annualreport
Enabling a mobile world
Weve focused our business on mobile broadband. This is our speciality. We help mobile operators grow protable businesses that realize the extraordinary potential of mobile broadband. The work that we do powers some of the most exciting opportunities for our generation andwill do so for generations to come. Within these pages you will nd out more about who we are, our turnaround, how we are building the infrastructure for the next generation of mobile networks, and how delighted our customers are in their relationship with us. We welcome you to an exploration of how we are enabling the mobile world. Nokia Siemens Networks for a world in motion
Annual Report 2012
A word from our customer
Helping to build customer loyalty

A partner who helps us keep our promises to our customers thats the must for us.
Mary N. Dillon, President and Chief Executive Ofcer, U.S. Cellular
Read more about our work with U.S. Cellular in our online Annual Report
Country: United States Number of customers: 5.8 million Strategic focus: Customer satisfaction with state-of-the art network services
Overview
1 2 4 6 8 9 10

Enabling a mobile world A word from our customer: U.S. Cellular Who we are and what we do 2012 highlights A letter from our Chairman Our Board of Directors A word from our customer: SoftBank
Annual Report 2012 3
Overview Who we are and what we do
The worlds mobile broadband specialist
Nokia Siemens Networks, a joint venture between Nokia and Siemens, is the worlds specialist in mobile broadband. We provide mobile operatorswith hardware, software andservices to plan,design and build their networks; tooperate and maintain those networks;and to enhance their customers experience.
Across the world, the demand to be connected anywhere, anytime, using any device, is exploding. Addressing that challenge requires network infrastructure that only very few companies can provide and Nokia Siemens Networks is one of those companies. Our focus is on the mobile broadband technology and services thathelp mobile operators to meet the challenges of today and tomorrow: from the radio equipment found on towers and rooftops around the world, to the sophisticated software systems that manage complex networks, to the services that make it all worktogether. Our customers include most of the worlds leading telecommunications companies, including Amrica Mvil, China Mobile, Deutsche Telekom, SoftBank, Telefnica, T-Mobile USA, Verizon and Vodafone. Our organization is based on two businesses units: Mobile Broadband and Global Services. In 2013, we have customerfocused sales and delivery organizations grouped into three large geographical areas: North America, Europe and Latin America, andAsia, Middle East and Africa.
Our business units Together, our Mobile Broadband and Global Services business units ensure that mobile operators can efciently provide their customers with a superior experience.
Mobile Broadband
Mobile Broadband Our Mobile Broadband business unit provides mobile operators with radio and core network software together withthe hardware needed to deliver mobile voice and data services. The product portfolio includes Liquid software, which allows unrivalled exibility and adaptability including migration towards a cloud architecture; network management tools that provide a real-time view of the network performance and quality of service; and customer experience management software that monitors and adapts network and service experience.
Global Services
Global Services The Global Services business unit provides mobile operators with a broad range of services, including professional services, network implementation and customer care services. Within professional services arenetwork planning and optimization, systems integration and managed services for network andserviceoperations.
Nokia Siemens Networks
Key statistics
Achievements An industry-leading 4G (LTE)portfolio with 77 commercial contracts atyear-end 2012
58 400 employees
Named number one inLTEinnovation and implementation for the second year in a row by ABIResearch
Only company supplying LTE radio technologies to allmajor mobile operators inJapan and South Korea 3 million mobile base stations in service todate A powerful services player that has articulated a credible plan on how it intends to focus, according to Current Analysis
Deployed networks that help people stay connected in over 150 countries
Substantial improvements inall areas of product quality, including a 32% year-onyear reduction in open customer defects
Annual Report 2012
Overview 2012 highlights
Execution, progressand momentum
In 2012, Nokia Siemens Networks made signicant progress in executing its strategy to focus on mobile broadband. The impact is visible in the vastly improved nancial performance and operational achievements over the year. From a nancial perspective, it was the best year in our history. Operationally, it was a milestone year as well. Our efforts to deploy our innovative technology into thehigh growth areas of the mobile broadband market showed strong momentumand, importantly, received strong endorsement from ourcustomersand positive reactions fromindustry analysts.
Financial highlights
13.4bn 822m 30.7% 1 .3bn

Operating prot before specic items* of 822m, up145% from335min2011.
Full-year sales of 13 372m, down slightly from 13 645m in2011despite divestments and signicantcountry and contract exits as part of our restructuringprogram.
Signicant improvement in gross margin before specic items* to30.7%,up from 27.5% in 2011.
Key nancials 2012

EURm
Rigorous working capital management helped to drive positive cashowinevery quarter of the year, strengthening theGroupscash position, with a net cash positionof1285m in 2012, up from 8m in 2011.
*T he before specic items nancial measure excludes specic items for all periods: restructuring charges, country/contract exit charges, merger-related charges, purchase price accounting related charges and other one-time charges. t December 31, 2012, Optical Networks was classied as a disposal group A heldfor sale and is presented as discontinued operations on a separate incomestatement line, Loss for the year from discontinued operations. Allcomparative Optical Networks results for the years ended December 31, 2011and 2010 have been re-presented as discontinued operations on the faceof the income statement.
Net sales Operating prot before specic items Operating prot % before specic items Operating loss after specic items Operating loss % after specic items Loss for the year EBITDA before specic items
13 372 822 6.1% (741) (5.5%) (1 445) 1 094
Operational highlights Successful transition to a focused mobile broadband company: Achieved world record 4G mobile network throughput at 1.6 Gb per second in 2012. This was our fth straight 4G speed record in 2012. Unveiled industry award-winning Flexi Zone solution for deploying a small cell overlay for fast and exible 4G network coverage in high-density areas: Flexi Zone is by far the most innovative approach taken by any of the tier one Original Equipment Manufacturers (OEMs). Michael Thelander, Chief Executive Ofcer and Founder, Signals Research Group
Through selectively exiting non-core lines of business, NSN has also moved to transform its corporate culture to achieve a atter, more responsive structure. When combined with efforts to establish quality as a differentiator, NSN is creating a nimble and effective competitive force. Ken Rehbehn, Principal Analyst, Yankee Group
Demonstrated our commitment tostaying at the forefront of mobile broadband innovation with the opening of a mobile broadband testing and development facility at Silicon Valley inthe USA.
Launched the rst vendor operated Service Management Capability Center for global delivery of service operations and management: We are delighted that Nokia Siemens Networks has come up with an end-to-end approach to manage the service lifecycle efciently and thus enhance customer experience to a newlevel. Vishant Vora, Director Technology, Vodafone India Ltd, Vodafone India
Demonstrated the reliability of core virtualization and cloud management witha top global operator (part of the leading Liquid Core architecture).
Introduced industry award winning CEM on Demand solution, a userfriendly online portal for managing customer experience: NSNs early championing of CEM, as early as a year ahead of rivals, is likely responsible for the companys positive recognition among operators. Jason Marcheck, Service Director, Current Analysis
Developed the groundbreaking Liquid Applications which redenes the role of the base station by turning them into local hubs for service creation and delivery, and transforming the mobile broadband customer experience.
Maintained the lead and strong performance in packet core:
Nokia Siemens Networks mobile packet core solution is very threatening in the market, because it was one of the early EPC solutions and has maintained market momentum with major mobile operators based on functionality and quality of experience, and now with class leading performance. Glen Hunt, Principal Analyst, Current Analysis
Annual Report 2012
Overview A letter from our Chairman
A year of signicant progress
In this letter my rst as Chairman of NokiaSiemens Networks I am pleased to report ayearofsignicant progress. Towards the end of 2011, we announced a new strategic direction, along with a substantial, two-year restructuring program designed togive us a strong foundation for the future. Those efforts are already showing results. We delivered the best nancial performance in our six-year history, with operating prot before specic items up 145% to EUR 822 million. After specic items, we reported a full-year operating loss of EUR 741 million, reecting theongoing costs of our investment into restructuring. Over the course of 2012, deep structural changes were made to Nokia Siemens Networks that will enable it to better compete in coming years. Non-core businesses were divested; headcount wassignicantly reduced; poorly performing contracts and countries were exited; non-personnel costs were reduced; pricing discipline was improved through centralization; leadership was upgraded; quality was enhanced; roadmaps were stabilized; andoverall governance was strengthened. Given this progress, we were able to raise our cost savings target inearly 2013.
To be clear, however, our work is not yet done, and signicant opportunities for further improvement remain. Product quality canbe further improved, and roadmaps better aligned to customer needs. Productivity and efciency can be strengthened. Employee morale and engagement can be boosted. In short, while we have made considerable progress, the speed and momentum of our change must continue in 2013. Maintaining this progress is essential as we do not expect a signicant change in market conditions in 2013. Despite strong underlying fundamentals, particularly continued data trafc growth, we expect the mobile broadband market to be relatively at, as operators maintain tight control of both capital and operating expenses and macro-economic conditions remain uncertain. Asaresult, of this market environment, we expect competition to remain challenging. Looking forward, I remain condent that our new strategy and underlying structural changes put Nokia Siemens Networks on theright path to become a sustainably protable business. Our longer term view is that the new strategy, combined with excellence inexecution, enables us to target on a longer term an operating margin of between 5% and 10%*. The publication of this report in which we are sharing details about the performance of our business at a more granular level than ever before is a step forward in greater transparency and engagement with stakeholders both externally and internally. In introducing it, I would like to thank our shareholders Nokia and Siemens for their support of Nokia Siemens Networks, and to take this opportunity to thank all our employees for their dedication and commitment to the business. Their actions have helped us to deliver a game-changing year for Nokia Siemens Networks and have made a real difference inpositioning the Group for the future. Jesper Ovesen Chairman
The longer term view of Nokia Siemens Networks is that our new strategy, combined with excellence in execution, enables us totarget ona longer term an operating margin ofbetween 5% and10%*.
* Excluding specic items.
Overview Our Board of Directors
Drawing on our expertise
Left to right: Jesper Ovesen Chairman of the Board of Nokia Siemens Networks Juha krs Executive Vice President Human Resources of Nokia
Timo Ihamuotila Executive Vice President Chief Financial Ofcer of Nokia Joe Kaeser Member of the Managing Board and Chief Financial Ofcer of Siemens Barbara Kux Member of the Managing Board and Chief Sustainability Ofcer of Siemens
Louise Pentland Executive Vice President Chief Legal Ofcer of Nokia Peter Y. Solmssen Member of the Managing Board and General Counsel of Siemens
Outgoing Niklas Savander Riikka Tieaho Siegfried Russwurm
55
To nd out more about our Board of Directors see p55
Annual Report 2012
Readying the network for iPhone 5

We are committed to offering the very best mobile broadband experience to our customers. That requires quick thinking, a exible approach and extremely innovative problem-solving.
Junichi Miyakawa Executive VP, Director & CTO, SoftBank Mobile
Read more about our work with SoftBank in our online Annual Report
Country: Japan Number of subscribers: 31 million Strategic focus: Information Revolution Happiness for everyone
Overview
Business review
12 16 18 21 22 24 26 28 29 47 48 50 52

Chief Executive Ofcers strategic review Our senior management team Our strategy and transformation A word from our customer: SK Telecom Industry trends How we operate Where we operate A word from our customer: KDDI Operating and Financial Review A word from our customer: TeliaSonera Corporate responsibility Risk factors A word from our customer: Safaricom
Business review Chief Executive Ofcers strategic review
Delivering on a promise
Key achievements in 2012 Delivering against our mobile broadband strategy including divestment of ve non-core businesses
Excellent progress made in delivering cost savings
Operating prot before specic items increased by 145% Positive cash generation led to a net cash position at the end of the year of 1.3 billion
Areas for focus for 2013 Building on our progress in quality and innovation in mobile broadband products and supporting services
Strong performance in all key geographical markets
Strong cash generation
Rajeev Suri Chief Executive Ofcer

A little over a year ago, Nokia Siemens Networks announceda bold new direction. We said that we would become the worlds leading mobile broadband specialist by focusing on this specic market, dedicating ourselves to world-class innovation to meet ourcustomers needs, and achieving quality of such an exceptionally high level that it would become a key differentiator for us. At the same time, we launched a substantial two-year restructuring and transformation program, designed to build a business that can succeed in todays market and take advantage of future industry dynamics. Improving nancial performance Nokia Siemens Networks 2012 nancial results are testament bothto the strength of our vision and the effectiveness of our restructuring. The benets of our strategy became apparent inthesecond half of the year, when we set new quarterly records with our highest ever gross margins and operating margins.
Net sales
EUR million 14 000 13 500 13 000 12 500 12 000
13 645 13 372
12 206
2010
2011
2012
Operating prot before specic items

EUR million 900 700 500
Nokia Siemens Networks 2012 nancial results are testament both to the strength of our vision and the effectiveness of our restructuring.
On a full-year basis, operating prots before specic items increased 145% to EUR 822 million, making 2012 the best year in our six-year history. Gross margin before specic items rose year-on-year from 27.5% to 30.7%. We signicantly improved our cash management, ending 2012 with EUR 1.3 billion in net cash. Net sales at EUR 13 372 million were virtually the same as in 2011, even after our portfolio streamlining, divestments and exits from less-protable contracts and countries. Based on the strength of this performance, we managed to improve the maturity prole of our EUR 600 million term loan, extending it to March 2014.
822
335
300 100
166 2010 2011 2012
Gross margin before specic items

% 31 30 29
30.7%
28.2%
28 27
27.5%
2010
2011
2012
Annual Report 2012
13
Business review Chief Executive Ofcers strategic review continued
An effective restructuring At the heart of this story lies a well-designed and effectively executedrestructuring. In connection with outlining our strategy in November 2011, we had set ourselves the goal of delivering EUR 1 billion in cost savings. We were able to raise that target in early 2013, whereby Nokia Siemens Networks targets to reduce annualized operating expenses and production overheads, excluding specic items by more than EUR 1 billion by the end of 2013, compared to the end of 2011. During 2012, we decreased indirect spending by a fth. We have reduced our real estate footprint by approximately 408 000 square meters. Internal headcount is down by approximately 20%. Five businesses have been divested, with two more divestments ongoing. We have exited multiple poorly performing contracts and ceased from active business in several countries. IT outsourcing agreements have been signed with ATOS and Wipro. The restructuring is not just about cost savings, however, but also about making deep structural changes that will bring us benets wellinto the future. For example, we have brought new rigour to contract management, limiting the impact of ongoing price erosion; simplied our organization in order to clarify decision-making andaccountability; and moved forward to renew many of our end-to-end processes. Delivering against our strategy To meet our aim of becoming a mobile broadband powerhouse, we have focused, both in terms of technology and geography. We have also put a strong emphasis on quality and innovation as important differentiators. In 2012, we showed that we are already delivering against that strategy. Focus Our focus on mobile broadband has enabled us to increase our strengths in this segment. For example, industry analysts put our market share of 4G (LTE) at about 20%, conrming us as a strong number two player in this important, fast-growing mobile technology. Our strong position extends well beyond radio into areas such as professional services, 4G IMS core, Customer Experience Management (CEM), Subscriber Data Management (SDM) andbeyond. We have refocused our attention geographically, categorizing our regional business according to market conditions. In 2012, this approach led to successful contracts in the advanced markets of Japan, South Korea and the USA; signicant improvements in the previously weak Middle East and Africa; and solid performance across the rest of the markets in which we operate. Services remain an important part of our business, sharply focused on those activities that enable our customers to fully exploit the value of their mobile broadband investments. Our Global Services business unit showed improved protability during 2012, partly due to a refocused portfolio. We are fully committed to taking the units protability higher in the future.
Quality Our goal is to ensure that mobile operators can provide their customers with the best experience. Achieving this requires an unwavering commitment to quality and we have made that commitment. We believe that we can differentiate on quality by concentrating on the aspects that are most important to mobile operators and their customers. While we monitor many quality metrics, we have identied six key ones which are regularly monitored at Board level. These indicators contribute the most signicantly to ensuring the best experience for mobile operators customers and all showed signicant improvement in 2012. To take just one example, 24 out of 28 programs met their path to virtual zero software quality targets. This is a sophisticated quality improvement technique in which product development projects are measured against very strict quality goals. This is just one of the world-class processes that we are proud to have adopted from Motorola, a recognized leader in quality. To support our focus on quality, we made the hard decision in 2012 to reset our product roadmaps. This action was not taken lightly, but we believe that it was necessary to provide our customers with the quality and predictability that they require. Since this reset, we have seen a dramatic improvement in the on-time delivery of new products and features. Innovation Our commitment to Research and Development (R&D) is as strong as ever. We have increased R&D spend in our key businesses and reduced R&D spend overall to align with our refocused portfolio. For example, R&D investment for next generation radio and core increased by 18% between the start of 2011 and the end of 2012. Our goal is to help x the real world problems that mobile operators face and to provide the advanced technology that will give them a leading edge in competitive markets. Innovations such as our Liquid Radio which enables the network to adapt to changes in demand, or in our CEM solutions which help operators maximize the business returns from network investments demonstrate that our newly-focused approach to R&D is already paying off. Recent projects include Dense RAN which is an innovative way to improve the user experience for mass events like rock concerts, sporting events and so on at which upload trafc is much higher than download (as people take and send photos and videos to friends). This usage is contrary to the usual usage pattern, in which download demand is higher than upload.
14
Strong intellectual property development is also a key part of our customer-focused innovation strategy. In the fourth quarter, we generated over EUR 35 million in intellectual property revenue and we will continue to consider licensing or selling patents where doing so makes sense for our future. 2012 also saw the opening of our mobile broadband testing and development facility in Silicon Valley. Our products and solutions continue to collect honors from industry peers. These include the Global Telecoms Business Innovation Award 2012 for our CEM on Demand products, which are helping mobile operators like Telkomsel gain deeper insight into their customers experience. We also launched our Flexi Zone approach for small cell coverage, which won in its category at the Best of 4G Awards, 4G World and the Small Cell Forum Industry Awards 2012. Our people 2012 was a challenging year for everyone at Nokia Siemens Networks. The signicant headcount reduction program that we started last year was naturally a difcult exercise. Nevertheless, we saw a nine percentage point increase in the proportion of employees expressing support for our direction. We will make efforts during 2013 to continue increasing our employee engagement, satisfaction and motivation. Over the course of the year, we made Nokia Siemens Networks a safer place to work, with a priority placed on employee health and safety. This effort has resulted in a 29% reduction in the number of health and safety recordable incidents.
Looking forward 2013 will continue to be a year of change at Nokia Siemens Networks as we shift our focus from restructuring to transformation. While we have made remarkable progress, we also recognize that there is more to do. Our priorities in 2013 include completing our restructuring, consolidating our progress in quality, and accelerating our innovation. We will continue to develop our customer relationships and ensure that we remain a strong, global player in mobile broadband and supporting services. Maintaining a strong nancial position and liquidity prole is another key focus area. We will continue to work towards our long-term nancial goals which include longer term nancing as a way to diversify our funding sources. We have become a far more efcient business in 2012 and will continue those efforts until we become the leanest, most productive company in our sector. We have reason to be pleased with our 2012 performance, but we are not yet satised. Our work continues and we expect to end 2013 in an even stronger position than we are in today. Rajeev Suri Chief Executive Ofcer
2013 will continue to be a year of change at Nokia Siemens Networks as we shift our focus from restructuring to transformation. While we have made remarkable progress, we also recognize that there is more to do.
Annual Report 2012
15
Business review Our senior management team
The leadership we need to deliver our strategy
Rajeev Suri Chief Executive Ofcer (CEO)

Rajeev has more than 23 years of international management experience. He is a leader who cherishes the opportunity of transformational and turnaround assignments. Rajeev has worked in roles comprising strategy and M&A, product marketing, business intelligence, sales, major account leadership, regional and business unit leadership and has lived in the Middle East, Asia, Africa and Europe. Rajeev joined Nokia in 1995, headed the Asia Pacic region in Nokia and Nokia Siemens Networks, then transformed and grew the Global services business unit. Rajeev has been CEO since October 2009 presiding over consistently improving results anda fundamental reshaping of the strategy leading to the successful turnaround and restructuring of Nokia Siemens Networks. Rajeev is based in Espoo, Finland.
Samih Elhage Chief Financial Ofcer (CFO)

Samih has 23 years experience in the telecoms industry. He has deep experience in nancial and operational management. He has substantial experience in building high performing organizations, leading business transformations, and establishing operational excellence invarious global markets. Before joining NokiaSiemens Networks in March 2012, Samih served as a senior advisor to leading private equity and global management consulting rms, and as a senior operating executive at Nortel. Heis based in Munich, Germany.
Kathrin Buvac Vice President, Corporate Strategy and CEOOfce

Kathrin has 12 years of international management experience in the telecoms industry, having held positions in nancial management, auditing, integration planning and synergy execution. Kathrin has been instrumental in building Nokia Siemens Networks current strategy. Her responsibilities cover corporate strategy, Secretary to the Executive Board and Chief of Staff to the CEO. She is located in Munich, Germany.
Deepti Arora Vice President, Quality

Deepti is responsible for Nokia Siemens Networks quality strategy and related execution. She joined Nokia Siemens Networks in 2011 from Motorola Wireless Networks, where she held the role of Head of Global Quality. Before this, Deepti was responsible for platform quality andproduct performance at Motorola Mobility, and led business operations at Motorola Software Group. She is based in Chicago, Illinois, in the USA.
Hans-Jrgen Bill Executive Vice President, Human Resources

Hans-Jrgen has a long history of developing new opportunities in the telecoms market and has worked with many of the worlds largest global operators. He brings his diverse and extensive business leadership skills to the development of Nokia Siemens Networks workforce strategy. Heis based in Munich, Germany.
16
Ashish Chowdhary Executive Vice President/ President, Asia, Middle East and Africa
With Nokia and Nokia Siemens Networks since 2003, Ashish has held numerous global general management roles in technology and telecoms, most recently serving as our Head ofGlobal Services. Ashish is a hands-on, results-driven executive, with a track record in building high-performing international teams. In September 2010, he was named one of the Top Ten Movers and Shakers in the global telecommunications sector by Light Reading. He lives in New Delhi, India.
Alexander Matuschka Chief Restructuring Ofcer

Alexander has gained extensive experience in various positions in the automotive and machining industry including restructuring, re-organization, procurement, logistics, supply chain management, and lean manufacturing and assembly. He was an industrial advisor for private equity companies before joining us in 2011. He is based in Munich, Germany.
Marc Rouanne Executive Vice President, Mobile Broadband

Marc has 20 years of international management experience in the telecoms industry, having held positions in R&D, customer operations, and product management. He was responsible for ensuring that Nokia Siemens Networks was the rst inthe world to ship 4G (LTE) compatible hardware to customers in 2008. He is based inEspoo, Finland.
Hossein Moiin Executive Vice President, Technology and Innovation

Hossein joined Nokia Siemens Networks in 2010, having held senior technology positions at BT, T-Mobile and Sun Microsystems. As well as guiding our technology and innovation direction by providing long-term views on network architecture and its evolution, he is responsible for our research and IPR. He is based in Espoo, Finland.
Barry French Executive Vice President, Marketing, Communications and Corporate Affairs
Barry has been a member of the senior management team since Nokia Siemens Networks was created. His responsibilities include marketing, communications, government relations, and occupational healthand security. He has a wide range ofexperience in Fortune 500 companies across many sectors. He lives and works inLondon, UK.
Ren Svendsen-Tune Executive Vice President/ President, Europe and Latin America
Prior to joining Nokia Siemens Networks in 2012, Ren was chief executive of Teleca, a supplier of software services to the mobile, consumer electronics and automotive industries. Before that he spent 13 years with Nokia, where he served in a range of positions, including Senior Vice President of Global Customer and Market Operations. He is basedin Munich, Germany.
Annual Report 2012
17
Business review Our strategy and transformation
Creating value
In November 2011, Nokia Siemens Networks announced a new strategy founded upon three key pillars: 1Focus 2Innovation 3Quality While we intend to continue to adjust our strategy as the market evolves, our commitment to these pillars is fundamental to how we create value. The progress that we made in 2012, and our signicantly improved nancial performance, are both early validation of the strategic choices we have made.
1Focus
Our focus is exclusively on the mobile broadband market, a market that is essential to the future of the telecommunications industry and in which we have scale, technological leadership, and a broad installed customer base. With this in mind, we intend to put our radio, core network and Customer Experience Management (CEM) products at the forefront of our business. We will focus our investments in the areas where we either are today, or have a clear path to become, a market leader. These areas include radio (3G and 4G including small cells and linking these to Wi-Fi), core networks, IP Multimedia Subsystems (IMS), Operations Support Systems (OSS), CEM, and Subscriber Data Management (SDM). We will innovate in areas that helps make our portfolio unique, going above and beyond the standards in order to bring the greatest possible value to our customers. And, we will leverage our more mature technologies, such as 2G radio, that still have demand and give us the opportunity to maintain customer relationships that will move on to more advanced technologies at a later date. Our Global Services organization is designed to ensure that we deliver and maintain these products, while helping our customers maximize efciency and provide a superior experience to their customers.
18
2Innovation
We have adopted a customer-focused approach to innovation, which aims to deliver a better return on investment than traditional standards-based R&D. Our resources and attention are squarely focused on the real life challenges faced by operators. An example of how we innovate together with our customers is the advanced Dense RAN solution which has the potential to avoid network trafc overloads at big events. We also work to drive the evolution of the mobile broadband ecosystem. We do this through collaboration with publicly funded projects such as METIS, Comora and SEMAFOUR; partnership with innovative companies to optimize our R&D investments and target new market opportunities in areas such as Telco Cloud and Security; and deep engagement with world leading research institutes on topics such as big data analytics. Ultimately, we use insight in from all these areas and more to provide extremely strong contributions to the development of industry standards. The Nokia Siemens Networks-owned portfolio of around 3 800 patent families (comprising 12 000 individual patents and patent applications) is a testament to our R&D commitment. This patent portfolio, which is primarily focused on mobile communications, has resulted in a stream of continuous technology breakthroughs and industry awards. Consequently, Nokia Siemens Networks is a signicant holder of Intellectual Property Rights (IPR) and is looking into more ways to make use of this asset.
3Quality
In 2011, we took the decision to make quality a strategic priority and a differentiator for us against our competitors. To deliver against that goal, we have devoted time, resources, and signicant management attention. Over the course of 2012, we created dozens of cross-functional, end-to-end quality teams to drive improvements, deployed more than 15 new best practices, established an outage reduction forum, expanded quality training, launched collaborative quality efforts with multiple customers, and took many other concrete steps. Those steps delivered signicant improvements in 2012, including a 32% year-on-year reduction in open product defects, conrmed outages cut by almost one-third, virtual zero software quality targets on track for a vast majority of business lines, thousands of employees trained on new quality techniques, and a meaningful increase in how customers perceived the value of our products and services. In 2013 our focus will be on expanding our quality efforts to new areas, as well as institutionalizing the changes we have already made so quality becomes permanently embedded in Nokia Siemens Networks culture.
Annual Report 2012
19
Business review Our strategy and transformation
Transformation
In November 2011, we announced anewstrategy, including changes toourorganizational structure and an extensive restructuring program, aimed at developing our position as a leader in mobile broadband and improving our competitiveness and profitability.
2012 Achievements Business re-focused on mobile broadband Evolving our services business
Our restructuring activities required a significant investment in our business in the form of restructuring charges of over EUR 1 billion in 2012. These charges had a significant effect on our profitability for the year but have enabled us to create a much lower cost base for the future.
We have invested in the growth mobile broadband technologies such as 4G and, at the end of 2012, were ranked as the second largest LTE vendor by industry analysts. We also divested a number of businesses which were not in line with this strategy and delivered improved Mobile Broadband protability in the year. We focused our service offerings on the services that contribute the most to enabling mobile broadband and that have the most value for our customers. We also chose not to renew contracts that were not in line with this strategy and at the same time improved our global delivery model. Combined, these measures have improved our Global Services operating margins. During 2012, we enacted a number of planned measures including the transfer of activities to global delivery centers, consolidation of certain central functions, and efciencies in service operations. Together these actions enabled us to dramatically reduce our real estate requirements by 408 000 square meters; closing 175 sites. In addition to increasing our investments in the most important technologies we have increased our overall R&D efciency. This has been achieved by improvements in quality, improved processes, a atter organisation, a better geographical balance and an increased focus on delivering to immediate customer-specic requirements. This will remain a priority area in 2013. We have reduced other costs such as travel expenses dramatically by bringing in new policies but also by creating awareness of the issue. Other areas addressed included information technology, product and service procurement costs, overall general and administrative expenses, and a signicant reduction of suppliers to further lower costs and improve quality. In 2012, we signicantly improved our cash position despite restructuring related outows. By reducing our overdues and inventories we improved our working capital by approximately EUR 1 billion over the course of the year. This contributed to positive free cash ow generation in every quarter.
Optimized real estate footprint
Improved R&D efciency
Targeting other costs
20
Improved working capital
Getting ready for the future

We, SKT and NSN have already prepared for the evolution of the LTE system.
Jong-Bong Lee Senior Vice President, Head of Network Strategy Ofce
Read more about our work with SK Telecom inouronline Annual Report
Country: South Korea Number of subscribers: 26 million Strategic focus: Differentiation through innovation
Annual Report 2012
21
Business review Industry trends
For a world that wants more and more
The future of the telecommunications industry will be increasingly powered by mobile broadband. Today, of the 6.5*billion global mobile subscriptions, already 1.65* billion are using mobile broadband.
Consumers use the internet through a variety of devices and expect reliable connectivity and access to services everywhere. They also demand the highest possible standard of excellence from their mobile operators. Yet, according to our Acquisition and Retention Study 2012, overall satisfaction is decreasing globally, and 47% of customers with mobile internet bundles in mature markets are prepared to switch operators within 12months if they do not get the experience they demand. The impact of network and service quality on churn has grown signicantly, messaging and internet quality now being the most important retention criteria in advanced mobile broadband markets. Demand for mobile broadband, coupled with the rise of smart devices, represents the greatest opportunity for revenue growth and the greatest challenge in terms of network congestion for mobile operators in the years ahead. However, industry analysts predict that over the next eight years, the rise in mobile data trafc will accelerate much faster than operator revenues. Despite increases in network capacity, data usage offerings such as at-rate pricing are creating only a limited revenue opportunity for mobile operators, putting pressure on their margins. Mobile operators are faced with the challenge of delivering mobile broadband protably while simultaneously providing good quality of service to their customers.
To support the rise in data usage, mobile operators are investing in wireless infrastructure (like base stations and network software) for additional coverage and capacity. They are primarily growing the capacity of their networks by optimizing the networks and thedifferent radio technologies they use, and upgrading to latestgeneration wireless networks. These next generation technologies provide increased bandwidth and capacity, butrequire mobile operators to invest in new equipment, infrastructure and software for existing and new base stations. The growing challenge faced by mobile operators is also the ability to add intelligence into their network to handle trafc ows and complex application and quality-of-service requirements.
49% of customers agree that their mobile operator must offer excellent network quality, even if it costs a bit more.
To reduce cost and technology complexity, mobile operators are simplifying their operations and investing in new, more agile operations support systems. Some mobile operators are also outsourcing key network and service management tasks mostly through long-term partnership agreements. To improve customer loyalty and protability, operators are looking into customer experience management and business analytics tools, providing insight into their customers service and network experience. Mobile operators are also exploring ways to establish a valuable rolefor themselves in content and capabilities beyond connectivity. Over-the-top players are actively creating new business models that can be both opportunities and threats for operators. Responding tothe challenge, operators are giving increased attention to new innovative business models and new kinds of service offers tomonetize their networks and to change the game in contentdelivery.
The market today*
1.65 billion
Mobile broadband subscriptions globally
670 million
Smartphones sold in 2012
More than 55 million

Apps downloaded every day
* Source: Informa. Source: Nokia Siemens Networks Acquisition and Retention study 2012.
Our technology vision 2020 We at Nokia Siemens Networks believe that, by 2020, mobile networks will need to be ready to deliver one gigabyte per user per day, downloaded at speeds of more than 10 times the current level. One gigabyte per day equates to a 60-fold increase, or roughly a doubling of trafc per user every 18 months, compared to the average 500 megabytes per user per month some mobile networks in mature markets are seeing today. As demand moves towards onegigabyte per day, operators need to get the most out of their network resources, shift capacity and content where these are most needed, and provide a superior customer experience for a steadily growing mobile broadband customer base. To make this happen, Nokia Siemens Networks is exploring and developing vital capabilities and technologies in the following areas:
1 GB of personalized data per user per day protably by 2020.
Key area Supporting up to 1 000x more capacity where needed
How we are developing our capabilities To prepare for future trafc growth and 10 times more endpoints attached to networks than today, the capacity and data rates of mobile networks must be radically pushed into new dimensions by looking at ways to increase the amount of spectrum available, and at how to make the most efcient use of that, and also by increasing the number of sites. To support a good user-experience for the increasing number of real-time apps, end-to-end latency imposed by the network has to be signicantly reduced. Bandwidth,trafc control and proximity will solve the latency challenge. To ensure mobile broadband remains affordable, the network Total Cost of Ownership (TCO) per gigabyte of trafc needs to be radically decreased. One important lever is to automate all tasks of network and service operations by making networks intelligent: self-aware, self-adapting and agile.
Reducing latency to milliseconds
Teaching networks to be self-aware
Reinventing the telcos To further reduce cost per gigabyte, the utilization of all network resources through for cloud sharing in all dimensions must be maximized. Cloudication of telco networks and ultimately software dened networking is the way forward, as it will also make networks more agile while opening up new business opportunities for operators. Flattening energy consumption To achieve the lowest production cost level per gigabyte, the energy efciency of networks needs to be increased. The focal point for improving network energy efciency will be the radio access, which accounts for around 80% of all mobile network energy consumption. Apart from energy efciency innovations in the base station, network modernization and higher utilization through sharing of resources will be key for atteningenergy consumption.
Annual Report 2012
23
Business review How we operate
Focus in action: business units
We have modified our structure to align with our strategy to focus exclusively on mobile broadband, and now report across two business units: Mobile Broadband and Global Services.
Business units The Mobile Broadband business unit provides radio and core network software, network hardware as well as the underlying Operations Support Systems (OSS) and Customer Experience Management (CEM) software to mobile operators serving billions ofmobile subscribers across the globe. The mobile operator customers of the Mobile Broadband unit are supported by the Global Services unit, providing them with a broad range of services, including network planning and optimization, network implementation, managed services for network and serviceoperations, and care and maintenance services. Consistent with our strategy, in 2011 we identied certain product lines that have either been divested or are being managed for value. For these, we support existing customer contracts and customer commitments including currently contracted feature capabilities, aswell as limited new feature developments.
Mobile Broadband Our Mobile Broadband product portfolio includes our innovative and award-winning Flexi Multiradio Single RAN base station, a high capacity software-dened base station supporting 2G (GSM), 3G (WCDMA) and 4G (LTE) radio technologies, as well aspacket core products. To date, we have three million base stations in service, with a customer list that includes Amrica Mvil, China Mobile, Deutsche Telekom, SoftBank, Telefnica, T-Mobile USA, Verizon and Vodafone. Our Mobile Broadband portfolio also incorporates value-adding software products including OSS and Subscriber Data Management (SDM), as well as CEM. These products give mobileoperators a comprehensive and real-time insight into theircustomers service experience, and the tools that help themdrive new revenue and improve operational efciency. Throughout 2012, the Mobile Broadband business unit has further developed business in advanced markets and continues to perform well, delivering strong growth in 4G sales and a sustained 2G and 3G business, particularly in the USA, South Korea, Japan and Latin America, as well as in many other countries around theworld. At December 31, 2012, Nokia Siemens Networks hadatotal of 77 commercial 4G (LTE) deals, including major agreements modernizing network infrastructure with both SoftBank and KDDI in Japan, and T-Mobile in the USA. For the year ended December 31, 2012, Mobile Broadband generated net sales of EUR 6 043 million, which represented 45%of our total net sales, and non-IFRS operating prot of EUR488 million. To maximize the value for our customers, we are able to combine different radio technologies together seamlessly, incorporate small cells which increase the capacity of the networks, provide and integrate Wi-Fi and we have unique software which increases the utilization of all available spectrum and increases the amount of data which it can carry. Within Mobile Broadband, we are already working on enhancements as well as the next generation of technology, even as the latest 4G networks are being rolled out across the world.
6 043 million Net sales generated by Mobile Broadband 45% Of our total net sales 3 million Base stations delivered
to over 450 mobile operators
Global Services Our Global Services business comprises three business lines, each closely supporting the Mobile Broadband portfolio: Customer Care includes software and hardware maintenance, and competence development services Network Implementation includes services needed to build, expand or modernize a communications network efciently. Onaverage, over 330 000 sites are installed per year, over 40% ofwhich are implemented remotely, in 2012 we brought one site on air every 96 seconds. Professional Services provide the end-to-end capability to deliver and manage mobile broadband infrastructure and customer experience. Our system integration capabilities ensure that all the elements of a new mobile broadband solution seamlessly bring together new and legacy technologies. Network Planning and Optimization teams offer assessment, capacity and conguration planning, site count, and IP design. Within our Managed Services business we take the responsibility for running a range of services for operators, from network operations management to enabling them to offer new services to their customers. Over the course of 2012, a growing percentage of our global services began to be delivered through our network of delivery centers, which consolidate a range of service solutions into one location to provide greater efciency for customers. At the end of 2012, 21% of services were provided from our global delivery hubs. For the year ended December 31, 2012, Global Services generated net sales of EUR 6 929 million, which represented 52% of our total net sales, and non-IFRS operating prot of EUR 332 million.
Non-core During 2012, our Non-core business unit included WiMAX, Broadband Access and IPTV, which were divested during the year. By the year-end, the only business that remained in the Non-core business unit was Business Support Systems (BSS), which we plan to divest in the rst half of 2013. For the year ended December 31, 2012, Non-core generated net sales of EUR 365 million representing 3% of total net sales and a non-IFRS operating loss of EUR 33 million. Discontinued operations Towards the end of 2012, Nokia Siemens Networks announced itsintention to divest its Optical Networks business. As Optical Networks represented a separate business segment in the past, itispresented as a discontinued operation. The transaction is expected to close in the rst half of 2013.
6 929 million Net sales generated by Global Services 52% Of our total net sales
77
To see more on our segment information please see p77.

Business review Where we operate
Focus in action: markets
In 2012, Nokia Siemens Networks countryoperations were grouped intobroad geographical groups: theAmericas; Asia and Middle East; and Europe and Africa.
These three markets further divide into regions containing oursalesand delivery teams which benet from a very close relationshipwith mobile operators in their countries. We tailor ouroperating approach in the different regions and countries accordingto the macro-economic environment and the maturityoftheir telecommunications industry.
Americas
The Americas comprises operations in the USA and Canada in North America, and 11 countries in Latin America. Teams across the region work with eight of the top 10 North American mobile operators, as well as local operators, key cable andconvergence companies, and government entities. We also have the Innovation Lab, our agship mobile broadband testing and development facility, in the heart of Silicon Valley. The North America region was our fastest growing region in 2012 and delivered strong net sales during the latter part of 2012 both in products and services. In Latin America we see the opportunity for emerging economies toleap-frog a traditional 2G 3G 4G development pattern and invest in the most modern technologies. Smartphones and tablets are already transforming the face of the Latin American markets. TheLatin America region delivered a solid nancial performance over the course of the year. Latin America will be part of our Europe market in 2013.
Net sales by geographic area (EURm)
Key highlights Selected as a vendor to support T-Mobile USAs $4 billion 4G network evolution plan, modernizing the operators GSM and HSPA+ core and radio access infrastructure and deploying LTE
33% Europe and Africa 4 378m Americas 2 849m
21%
Establishing our global small cell center of excellence in the USA to drive small cell innovation with leading operators from around the world Launching wireless broadband services using 4G technology for SKY, the largest cable and satellite television operator in Brazil Launching LTE with Claro in Chile, the rst 4G in this key and well-developed economy in Latin America
Asia and Middle East 6 145m 46%
Being selected by Oi and TIM for 4G roll-out in Brazil; secured 3G expansion with Oi and Claro across the country
26
Asia and Middle East
Europe andAfrica
Asia and Middle East spans a huge geographical and economic scope consisting of operations in 17 countries in Asia and 16 countries in the Middle East. We have a strong presence across Asia, from mature markets to fast-emerging economies, including two of our focus countries, Japan and South Korea. We have close relationships with all the major operators, including SoftBank, KDDI, SK Telecom, China Mobile, China Unicom, Bharti Airtel, Optus, Vodafone and Indosat. The region delivered an outstanding year in 2012, with several key contracts, particularly in our focus countries, and excellent nancial performance. We have technology centers in multiple locations in Asia, with our agship mobile broadband center in Hangzhou, China,and our largest software center in Bangalore, India. In the Middle East we are focused on a select number of countries and customers, including Qtel Group, Zain Group, Saudi Telecom Company, Etisalat anddu, and we see strong demand for mobile broadband including 4G (LTE). Key highlights Working with SoftBank to upgrade its mobile broadband capability across Japan and to supply, deploy and integrate the operators 4G network Deploying the worlds rst self-operating 3G and 4G mobile network for KDDI in Japan Supporting leading Australian operator Optus in network modernization and 4G implementation Telkomsel Indonesia takes control of customers experience with Nokia Siemens Networks technology KT selects Nokia Siemens Networks for 4G deployment Supporting Bharti Airtel to deploy and manage 4G (TD-LTE) network in Maharashtra Chosen by Indosat, Indonesias leading mobile operator, as its mobile broadband vendor Selection by China Mobile to conduct a large 4G (TD-LTE) deployment across three cities Upgrading Saudi Telecom Companys GSM and 3G networks and expanding its 4G network
We operate in 52 countries across Europe, Russia and a further 20 countries inAfrica. The European region, including Russia and some central Asia countries, is our heartland and home to our headquarters in Finland and to our global delivery center in Portugal. In Europe, we work with all the regions major operators, including Vodafone, Deutsche Telekom, Telefnica, France Telecom, Sistema, MegaFon, TeliaSonera and WIND, serving hundreds of millions of demanding and sophisticated customers. Facing challenging macro-economic conditions across the European continent, we nevertheless maintained strong customer relationships throughout the region and achieved some notable wins. We have extensive R&D expertise in Europe, including some of our largest technology centers working on future mobile broadband technologies. In Africa, we are focused on both multi-national and regional operators, including Zain Group, Vodacom, Bharti Airtel and Mobinil. Africa will be part of our Asia and Middle East market in 2013. Key highlights Working with leading Polish operator, Polkomtel, to expand their HSPA+ and 4G (LTE) networks Bringing 4G (TD-LTE) to Spain in a deal with COTA a new player in Spanish telecoms Preparing O2s network in the UK for 4G Launching Russias rst 4G (TD-LTE) network, for MTS in Moscow and the citys environs Implementing a GSM-R upgrade to enhance security and speed on the Eskisehir-Ankara high-speed train line in Turkey Working with Tele2 to enhance mobile broadband across three Baltic countries Enabling MegaFon customers to enjoy enhanced mobile services in Russia Working with Vodacom to introduce voice and SMS over 4G in South Africa
Annual Report 2012
27
The worlds rst multi-vendor, multitechnology self-organizing network (SON)

As a leader in SON technology, Nokia Siemens Networks was the obvious choiceto help consolidate and optimize our networks.
Toshihiko Yumoto, Vice President and General Manager, Network Technical Development Division, Technology Sector, KDDI
Read more about our work with KDDI inouronline Annual Report
Country: Japan Number of subscribers: 37 million Strategic focus area: Customer Satisfaction by realizing 3M strategy Multi-Network, Multi-Device and Multi-Use
28
Business review Operating and Financial Review
A year of transformation and restructuring
Overview For a summary description of who we are and what we do see page 4. A review of our principal activities and performance for the year is contained in the 2012 highlights on pages 6 and 7, A letter from our Chairman on page 8, the Chief Executive Ofcers strategic review on pages 12 to 15, Our strategy and transformation on pages 18 to 20, How we operate and Where we operate on pages 24 to 27. Principal factors and trends affecting our results ofoperations Our net sales depend on various developments in the global mobile broadband infrastructure and related services market, such as network operator investments, the pricing environment and product and services mix. Over recent years, the telecommunications infrastructure industry has entered a more mature phase characterized by the completion of the greeneld roll-outs of mobile and xed network infrastructure across many markets, although this is further advanced in developed markets. Notwithstanding, there is still a signicant market for traditional network infrastructure products to meet coverage and capacity requirements, as older technologies such as 2G are supplanted by 3G and 4G (LTE). As growth in traditional network products sales slows, there is an emphasis on the provision of network upgrades, often through software, such as customer experience management software and subscriber management, and services, particularly the outsourcing of non-core activities to companies that provide extensive telecommunications expertise and strong managed service offerings. In emerging markets, the principal factors inuencing investments by mobile operators are the continued growth in customer demand for telecommunications services, including data, as well as new subscriber growth. In many emerging markets, this growth in demand and subscribers continues to drive growth in network coverage and capacity requirements. In developed markets, investments by operators are primarily driven by capacity and coverage upgrades, which, in turn, are driven by greater usage of the networks primarily through the rapid growth in data usage. Increasingly, mobile operators are targeting investments in technology and services that allow them to provide their customers with fast and faultless network performance in the most efcient manner possible, which optimizes their investment. Such developments are facilitated by the evolution of network technologies that promote greater efciency and exibility, such as the current shift from 2G and 3G networks to 4G (LTE) technologies. In addition, mobile operators are investing in software and services that provide them with the means to better manage customers on their network and also allow them additional access to the value of the large amounts of subscriber data under their control. The telecommunications infrastructure market is characterized by strong competition and price erosion caused in part by the successful entry into the market of vendors from China, such as Huawei Technologies
Co. Ltd. (Huawei) and ZTE Corporation (ZTE), both of which have gained market share by leveraging their low cost advantage in tenders for customer contracts. In particular, the wave of network modernization that has taken place, particularly in Europe but increasingly in other regions including Asia Pacic, has led to aggressive pricing as all vendors ght for market share. In 2012, we witnessed further competition emerging from Samsung Electronics, which has expanded its network infrastructure business out of the South Korean market with limited gains in Europe and the USA. The pricing environment remained challenging in 2012. Our net sales are impacted by these pricing developments, which show some regional variation, and in particular by the balance between sales in developed and emerging markets. While price erosion is evident across most geographical markets, it continues to be particularly intense in a number of emerging markets where many mobile operators have been subject to nancial pressure, both from lack of nancing as well as profound pricing pressure in their domestic markets. Pricing pressure is evident in the standards-based products markets, in particular, where competitors have products with similar technological capabilities, leading to commoditization in some areas. Our ability to compete in those markets is determined by our ability to remain price competitive with our industry peers. To remain competitive and differentiate us from our competitors, it is therefore essential that we constantly improve our technology while continuously reducing product costs to keep pace with price erosion. We have continued to make progress in reducing product and procurement costs in 2012 and will need to continue to do so in order to provide our mobile operator customers with high quality products at competitive prices. In the following sections we describe the factors and trends that we believe are currently driving our net sales and protability. For a better understanding of the industry trends in terms of mobility and data usage please see pages 22 and 23. Transformation and restructuring program In November 2011, we announced a strategic shift to focus on the mobile broadband market. As part of this strategic shift, we decided to focus our portfolio on our core businesses and sell or ramp down non-core activities. At the same time, we started a restructuring program to reduce our global workforce by 17 000 people by the end of 2013. These reductions are being driven by aligning our workforce with our new strategy as well as through a range of productivity and efciency measures. These measures include elimination of our matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of the Acquired Motorola Assets, efciencies in service operations and company-wide process simplication. Overall the transformation and restructuring have had a substantial effect on both gross margins and operating expenses.
Annual Report 2012
29
Business review Operating and Financial Review continued
Gross margin before specic items Our gross margin before specic items improved substantially in the three-month periods ended September 30, 2012 and December 31, 2012 to 32.4% and 36.0%, respectively, as compared to 26.9% and 29.5% in the corresponding periods of 2011. This improvement was driven principally by sales of a signicant proportion of higher margin software and products in our priority markets. Other signicant contributors to the improvement in gross margin include: We improved our pricing discipline to ensure that we were capturing the appropriate value for our products and services. Weare pricing our products based on their value to the mobile operators rather than based on our costs in delivering the contract. All major contracts now pass through specialist pricingteams. Our more focused portfolio has led to a decrease in our cost of goods as we have fewer product lines and are adhering to a much higher quality benchmark, which has resulted in fewer returns. We have improved the operational efciency of our supply chain, decreasing logistics costs and improving delivery reliability. Ourincreased operational efciency has resulted, for example, ina signicant reduction in the need for expensive air freight andthe lowest levels of supply shortages in Nokia Siemens Networks history. We increased the proportion of sales in markets with above average gross margins, such as Japan. Operating expenses before specic items We have reduced our operating expenses before specic items by 11.8% and 7.7% in the three-month periods ended September 30, 2012 and December 31, 2012, respectively, as compared to the same periods in 2011. This has been driven mainly by reductions in headcount which at 58 411, as of December 31, 2012 was at its lowest level since our formation in 2007.
Signicant contributors to the reduction in operating expenses before specic items include: We have closed and vacated 175 real estate sites, optimized site usage and relocated to less costly premises. We have reduced our total space by 408 000 square meters, and further space reductions are expected in 2013 as leases come up for renewal. We have established strong processes and governance procedures to reduce indirect costs such as travel, training and external services. Despite increasing Research and Development (R&D) investment in strategic areas such as 4G (LTE) radio technologies, we have maintained the overall spend by decreasing investment in previous generation radio technologies and non-core portfolio areas. A focus on higher quality products and divestments of non-core businesses has also resulted in a more efcient use of our R&D expenses. We continue to target a reduction in our annualized operating expenses and production overheads, excluding specic items by more than EUR 1 billion by the end of 2013, compared to the end of2011. While these savings are expected to come largely from organizational streamlining, we have also targeted areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses and a signicant reduction of suppliers in order to further lower costs and improve quality. During 2012, we recognized restructuring charges and otherassociated items of EUR 1.3 billion related to our ongoing restructuring program. By the end of 2012, we had cumulative cashoutows relating to restructuring and other specic items ofEUR 645 million. We expect restructuring-related cash outows tobe approximately EUR 450 million for the full year 2013, and approximately EUR 200 million for the full year 2014 related to ourtransformation and restructuring program. The following table sets forth the summary unaudited, condensed, consolidated quarterly nancial information for each of the quarters in the years ended December 31, 2011 and 2012 from continuing operations. This data has been derived from our unaudited quarterly nancial information, which are not included in this Annual Report, and should be read in conjunction with our Consolidated Financial Statements and the related notes.
30
For the three month period ended (unaudited) From continuing operations EURm, except percentage data March 31, 2011 June 30, 2011 September 30, December 31, 2011 2011 March 31, 2012 June 30, 2012 September 30, December 31, 2012 2012
Net sales Gross prot Gross margin Specic items therein Adjusted gross prot1 Adjusted gross margin1 Operating expenses Specic items therein Adjusted operating expenses2 Operating prot/loss (EBIT) Adjusted EBIT3 Depreciation and amortization (excluding PPA) Adjusted EBITDA4 Adjusted EBITDA margin4 Restructuring PPA related amortization Other PPA related charges Country/contract exit and merger-related charges Other one-time charges Total specic items Working capital5,8 Change in net working capital6,8 Free cash ow7,8
1
3 084 826 26.8% 7 833 27.0% (942) 141 (801) (116) 32 73 105 3.4% 14 120 14 148 2 370 (111) (158)
3 524 910 25.8% 26 936 26.6% (1 007) 131 (876) (97) 60 75 135 3.8% 57 84 5 11 157 1 527 (243) (923)
3 327 876 26.3% 20 896 26.9% (971) 105 (866) (95) 30 80 110 3.3% 17 91 8 9 125 2 277 49 (30)
3 710 1 096 29.5% (2) 1 094 29.5% (997) 116 (881) 99 213 78 291 7.9% 16 91 7 114 2 311 321 446
2 862 414 14.5% 348 762 26.6% (1 403) 515 (888) (989) (126) 76 (50) (1.7)% 748 91 8 16 863 1 384 554 291
3 233 780 24.1% 68 848 26.2% (1 006) 185 (821) (226) 27 68 95 2.9% 95 71 (4) 70 21 253 1 145 94 61
3 408 1 064 31.2% 41 1 105 32.4% (845) 81 (764) 219 341 67 408 12.0% 22 71 3 26 122 1 144 82 282
3 869 1 197 30.9% 196 1 393 36.0% (942) 129 (813) 255 580 61 641 16.6% 191 71 34 29 325 1 999 255 733
References to Adjusted gross prot and Adjusted gross margin are to gross prot and gross margin as adjusted for specic items. Specic items include restructuring charges, country/contract exit and merger-related charges, PPA related charges and other one-time charges. 2 References to Adjusted operating expenses are to operating expenses as adjusted for specic items. 3 References to Adjusted EBIT are to EBIT as adjusted for specic items. 4 References to EBITDA are to loss for the period before income tax expense from continuing operations, nancial income and expenses, depreciation, amortization and share of results of associates. Accordingly, EBITDA can be extracted from the Consolidated Financial Statements by taking loss for the period and adding back income tax expense, nancial income and expenses, depreciation, amortization and share of results of associates. References to Adjusted EBITDA represent EBITDA as adjusted for specic items. Specic items include restructuring charges, country/contract exit charges, PPA related charges and other one-time charges. References to Adjusted EBITDA margin represent Adjusted EBITDA divided by net sales. We are not presenting EBITDA or Adjusted EBITDA-based measures as measures of our results of operations. EBITDA and Adjusted EBITDA-based measures have important limitations as an analytical tool, and they should not be considered in isolation or as substitutes for analysis of our results of operations. 5 Working capital is dened as current assets less current liabilities. 6 Change in net working capital is dened as the period-over-period change in current receivables plus the change in inventories, less the change in interest-free short-term liabilities. 7 Free cash ow is dened as the sum of net cash ows from operating activities and net cash ows from investing activities. 8 Working capital, change in net working capital and free cash ows include continuing and discontinued operations.
Annual Report 2012
31
Motorola Solutions acquisition Assets acquired from Motorola Solutions (the Acquired Motorola Assets) contributed eight months of sales in the year ended December 31, 2011, which impacts the comparability of our results ofoperations for all periods presented. The delay to the completion of the acquisition caused a negative impact on business in the CDMA and WiMAX units (the latter of which has been divested). As part of our transformation restructuring program, we restructured the Acquired Motorola Assets. The acquisition has given us a global footprint in CDMA. The recent network infrastructure investment activity evident in the USA market and elsewhere, however, is beginning to slow, which has had a negative impact on sales in the CDMA unit. The acquisition has also strengthened our relationships with customers globally, particularly in Japan and the USA. From the date of acquisition on April 30, 2011, we had net sales of EUR 894 million contributed by, and a net loss of EUR 4 million in respect of the Acquired Motorola Assets for the year ended December 31, 2011. After the incurrence of EUR 39 million related to restructuring charges and EUR 48 million related to the amortization of acquired intangible assets and other purchase price accounting related charges, we had a net loss of EUR 4 million. Disposals not treated as discontinued operations As part of our strategy to focus on our Mobile Broadband business and on our higher margin businesses, we continually assess whether our operating companies are core to our overall business strategy or performing at acceptable levels. As a result, we may sell a business if it is deemed to be non-essential or underperforming. Such disposals may affect our results of operations and the period-to-period comparability of our nancial statements. In the ordinary course of business, we may sell other parts of our business and not treat them as discontinued operations (and are therefore included in continuing operations) for the periods under review as the businesses sold are not considered to represent a separate major line of business or geographical area of our operations. In connection with the strategy, seven divestments were announced in 2012 and ve of these deals were closed in the course of the year. The divestments concluded during 2012 were: A deal to transfer the microwave transport business, including its associated operational support systems and related support functions, to Dragonwave Inc. The sale of former Motorola Solutions WiMAX business to NewNet Communications Technologies. The divestment of xed line broadband access business and associated professional services and network management solutions to Adtran.
The sale of Belgacom-related IPTV assets to Belgacom and other IPTV assets to Accenture. A deal to transfer the Nokia Siemens Networks proprietary broadband business, Expedience, to CN Tetragen. In 2012, the total net consideration paid in connection with these disposals amounted to EUR 124 million in cash. Additionally, shares with fair market value of EUR 5 million were received. A loss, net of gains, of EUR 50 million arising from the sale of these businesses is included in other expenses in the consolidated income statement. On December 5, 2012, we signed a formal agreement with Redknee Solutions Inc., for the sale of our Business Support Systems Business, comprising the billing and charging software products and solutions and related services (together, the BSS Business). The transaction is anticipated to close in the rst half of 2013. The assets and liabilities of the BSS Business were classied as held for sale in the consolidated statement of nancial position at December 31, 2012. In 2011, impairment charges totaled EUR 19 million and these charges were recognized as a result of measuring these disposal groups at their fair value, less costs to sell. Certain of these transactions included contractual provisions that required cash payment on closing to the buyer and possible additional payments subsequent to the sale which will be made based on potential employee redundancies within the disposal group. These dispositions in 2011 were not classied as discontinued operations. Certain other factors Cost of components and raw materials There are several factors that drive our protability. Scale, operational efciency and cost control have been and will continue to be important factors affecting our protability and competitiveness. Our product costs are comprised of the cost of components, manufacturing, labor and overhead, the depreciation of product machinery, logistics costs as well as warranty and other quality costs. In the year ended December 31, 2012, components and other raw materials comprise approximately 85% of our cost of goods sold. Overall since 2010 we have reduced component costs as a result of annual purchase price negotiations. During that period we have also experienced some wage ination, particularly in China, where the rising cost of prices for goods such as food has driven inationary pressure in salaries. Similar pressures are evident in India, although from lower income levels.
32
Product mix and regional mix Our protability is also impacted by the pricing environment, product mix, including higher margin software sales, and regional mix. Our products, solutions and services, have varying protability proles. Our Mobile Broadband business offers a combination of hardware and software. These products, in particular software products, have higher gross margins; however, the products require much higher R&D investments. Our Global Services offerings are typically labor intensive while carrying low R&D cost and have relatively low gross margins compared to our hardware and software products. Many of our product service offerings combine elements from all business units, and several factors can inuence relative gross margin. In the year ended December 31, 2012, Global Services and Mobile Broadband accounted for 51.8% and 45.2%, respectively, of our total net sales in the year ended December 31, 2012. In the second half of 2012, we beneted from sales of an unusually large proportion of higher margin software and products in our priority markets. We have also beneted from being more selective about the services contracts we enter into and reducing our exposure to lower protability areas such as eld maintenance. Overall protability for certain regions should only be seen as indicative, as protability can vary from country to country, within a particular region and even from customer to customer within a particular country. During 2011 and 2012, we have pursued a policy of prioritizing markets such as Japan, South Korea and the USA, as these markets typically offer vendors more value than other markets. In general, developed markets provide relatively high margins while emerging markets, where mobile operators customers, and therefore mobile operators, are often more nancially constrained, provide lower margins. Regulatory issues We sell products and services that are regarded as sensitive from a security point of view by many governments around the world and therefore conform to certain regulations which are subject to change, which can occasionally cause disruption to sales. An extreme example of this was evident in the rst half of 2011 when changes to Indian security clearance regulations caused signicant disruption to sales of products. We work closely with authorities to understand concerns and to minimize the impact of such issues.
Exchange rates Our business and results of operations are from time to time affected by changes in exchange rates, particularly between the euro, our reporting currency, and other currencies such as the US dollar and the Japanese yen. Foreign currency denominated assets and liabilities, together with sale and purchase commitments, give rise to foreign exchange exposure. The magnitude of foreign exchange exposure changes over time as a function of our presence in different markets and the prevalent currencies used for transactions in those markets. The majority of our non euro-based sales are denominated in US dollars and in Japanese yen. In general, depreciation of another currency relative to the euro has an adverse effect on our sales and operating prot, while appreciation of another currency relative to the euro has a positive effect. In addition to foreign exchange risk of our sales and costs, our overall risk depends on the competitive environment in our industry and the foreign exchange exposures of our competitors. During 2012, both the US dollar and the Japanese yen were relatively volatile against the euro. During the rst half of 2012, both the US dollar and the Japanese yen appreciated against the euro, but subsequently depreciated. By the end of the year 2012, both currencies had depreciated against the euro compared to the rate at the beginning of the year. In the year ended December 31, 2012, approximately 43% (approximately 36% in 2011) of our net sales were generated in US dollars and Japanese yen. During the same period, approximately 32% (approximately 28% in 2011) of our cost base was in US dollars and in Japanese yen. Due to our currency mix, a depreciation of US dollar and Japanese yen had an adverse effect on our sales and operating prot. The majority of the impact of the US dollar and Japanese yen depreciation or appreciation against the euro on our operating results is however mitigated through currency hedging. Signicant changes in exchange rates may however impact our competitive position and result in price pressure through their impact on our competitors and customers. Overall hedging costs for the main exposure currencies have remained relatively low in 2011 and 2012 due to the low interest rate environment.
Annual Report 2012
33
To mitigate the impact of changes in exchange rates, we hedge material transaction exposures. For the majority of the hedges for forecasted future transactions, hedge accounting is applied to reduce prot and loss volatility. The main principle is that all major foreign exchange exposures are identied, analyzed and hedged by our treasury function. Specically: Statement of nancial position risks from foreign exchange positions in currencies other than the functional currency of the respective Group entity are identied and hedged on an ongoing basis. Cash ow risks arising from highly probable forecasted sales and purchases of the Group are identied on a monthly basis and hedged mainly under hedge accounting for a period of up to 15 months. These forecasted sales and purchases are typically realized within an equivalent period. We have some exposure due to unhedged risks which consists of exposures in currencies that either cannot be hedged or which are considered immaterial. In 2012, these currencies represent approximately 2% of our net sales (less than 2% of net sales in 2011). We have entities in Venezuela and Belarus where the functional currency is the currency of a hyperinationary economy. Hyperinationary accounting did not have a material impact on the statement of nancial position in 2012 or 2011. Trading in hyperinationary economies carries a risk of future devaluation of monetary assets and liabilities. This risk cannot be hedged. We have foreign exchange exposure in Iran that cannot be hedged. Iran does not have a hyperinationary economy but it is impacted by international sanctions, foreign currency access is limited, and several exchange rates are available. We recognized a foreign exchange loss of EUR 109 million due to the depreciation of the Iranian rial in 2012. Seasonality Our net sales are affected by seasonality. Historically, net sales in the rst quarter of the year have been the lowest and net sales in the fourth quarter of the year have been the strongest. Our net sales uctuate with our mobile operators planning, budgeting and spending cycle. For example, our net sales in the rst quarter of 2012 were EUR 2 862 million compared with EUR 3 869 million in the fourth quarter of 2012, and our net sales in the rst quarter of 2011 were EUR 3 084 million compared with net sales in the fourth quarter of 2011 of EUR 3 710 million.
Disposals treated as discontinued operations On December 1, 2012, we reached a formal agreement with Marlin Equity Partners, for the sale of our Optical Networks Business comprising the complete Optical Networks product portfolio, services offering and existing customer contracts (together, the Optical Networks Business). Completion of the transaction is anticipated during the rst half of 2013 and, according to managements fees estimates, a loss of at least EUR 130 million is expected to be recognized following the de-recognition of assets and liabilities to be transferred. In accordance with IFRS, we have presented the Optical Networks Business as discontinued operations in the consolidated nancial statements for the year ended December 31, 2012, and have re-presented the comparative results for years ended December 31, 2011 and 2010 included in those statements. Segment information Our results of operations include certain nancial information by product segment. We report across two business units: Mobile Broadband and Global Services. Other major lines of business previously were our Optical Networks and Non-core business units. AtDecember 31, 2012, Optical Networks was classied as a disposal group held for sale and, as it has represented a separate major business line in the past, is presented as discontinued operations. Assuch, it has been excluded from the segment reporting. During 2012, our Non-core business unit included the microwave transport business, WiMAX, broadband access, IPTV and Expedience, which were divested during the year, and BSS. By year-end, the only business that remained in our Non-core business unit was BSS, which will be divested in the rst half of 2013. We have aggregated the results of these separate businesses for reporting purposes, under All other segments, as they did not represent separate reportable business segments. We assess the performance of the operating segments based on a measure of operating prot that excludes certain items, referred to as specic items (for an analysis of specic items, please see Note 2 to our Consolidated Financial Statements). The costs of central functions and our worldwide sales and marketing organization have been allocated to the segments based on the utilization of the respective resources. Taxes, interest income and expenses are not allocated to the segments. There are no transactions between the segments. The segment revenue is measured largely in a manner consistent with revenue as reported in the consolidated income statement. Group level adjustments related to customer projects accounted for under the percentage of completion accounting method have been allocated to the segments.
34
Results of operations Year ended December 31, 2012 compared to year ended December 31, 2011 Our operating results for the year ended December 31, 2011 include eight months of the results of the Acquired Motorola Assets. Accordingly, our results for that period are not directly comparable to our results for the year ended December 31, 2012. The following table sets forth selective line items from our consolidated income statement and the percentage of net sales that they represent for Nokia Siemens Networks for the year ended December 31, 2012 and 2011.
For the year ended December 31 2012 From continuing operations Income statement information: EURm, except percentage data Before specic items Percentage of net sales Before specic items Percentage of net sales 2011
Specic items
Total
Specic items
Total
(%) change
Net sales Cost of sales Gross prot R&D expenses Selling and marketing expenses Administrative and general expenses Other income and expenses, net Operating prot/(loss) Share of results of associates Financial income and expenses, net and other nancial results Loss before tax Income tax/(expense) Loss for the year from continuing operations
13 372 (9 264) 4 108 (1 908) (885) (453) (40) 822
(653) (653) (208) (382) (242) (78) (1 563)
13 372 100.0% (9 917) 74.2% 3 455 (2 116) (1 267) (695) (118) (741) 8 (307) (1 040) (342) (1 382) 25.8% 15.8% 9.5% 5.2% 0.9% 5.5%
13 645 (9 886) 3 759 (1 969) (990) (497) 32 335
(51) (51) (107) (330) (37) (19) (544)
13 645 100.0% (9 937) 72.8% 3 708 (2 076) (1 320) (534) 13 (209) (17) (151) (377) (234) (611)
(2.0)% (0.2)%
27.2% (6.8)% 15.2% 1.9% 9.7% (4.0)% 3.9% 30.1% 0.1% 1 007.7% 1.5% 254.5%
The following table sets forth Nokia Siemens Networks net sales for the years ended December 31, 2012 and 2011 by segment and geographic area based on customer location. Nokia Siemens Networks selected segment data
From continuing operations EURm, except percentage data Mobile Broadband Global Services All other segments1 Other Total
2012 Net sales Operating prot/(loss) before specic items Operating prot/(loss) % before specic items 2011 Net sales Operating prot/(loss) before specic items Operating prot/(loss) % before specic items
1
6 043 488 8.1% 6 335 214 3.4%
6 929 332 4.8% 6 737 229 3.4%
365 (33) (9.0)% 573 (108) 18.8%
35 35
13 372 822 6.1% 13 645 335 2.5%
All other segments represent the aggregated results of several businesses that were divested or that were planned to be divested during 2012, with such divestment expected to be completed during the rst half of 2013.
Annual Report 2012
35
Nokia Siemens Networks net sales by geographic area

For the year ended December 31 From continuing operations EURm, except percentage data 2012 (audited) 2011 (audited) (%) change (unaudited)
North East Europe West Europe South East Europe Africa Europe and Africa Middle East Greater China Japan India APAC Asia and Middle East North America Latin America Americas Total
891 1 900 1 039 548 4 378 687 1 278 2 173 737 1 270 6 145 1 201 1 648 2 849 13 372
1 107 2 032 1 257 579 4 975 817 1 457 1 533 911 1 176 5 894 1 018 1 758 2 776 13 645
(19.5)% (6.5)% (17.3)% (5.4)% (12.0)% (15.9)% (12.3)% 41.7% (19.1)% 8.0% 4.3% 18.0% (6.3)% 2.6% (2.0)%
Net sales Year-on-year, our net sales decreased by 2.0% in theyear ended December 31, 2012 compared to the year ended December 31, 2011. The 2.0% decrease in our net sales was primarily due to modifying our structure to align with our strategy tofocus on mobile broadband as we streamlined our portfolios, divested non-core businesses and exited from loss-generating and poorly performing contracts and countries. The decrease in net sales due to the modication of our structure was partially offset by higher sales of infrastructure equipment and slightly higher sales of services in the second half of 2012. Of total net sales, Mobile Broadband contributed EUR 6.0 billion in the year ended December 31, 2012 (EUR 6.3 billion in the year ended December 31, 2011) and Global Services contributed EUR 6.9 billion in the year ended December 31, 2012 (EUR 6.7 billion in the year ended December 31, 2011). Net sales in Japan accounted for our largest concentration of net sales in the year ended December 31, 2012, representing 16.3% ofnet sales (11.2% in the year ended December 31, 2011). Other regions contributing signicant percentages of net sales in the year ended December 31, 2012 include West Europe, representing 14.2% of net sales (14.9% in the year ended December 31, 2011), and Latin America representing 12.3% of net sales (12.9% in the year ended December 31, 2011).
On a regional basis, net sales in the year ended December 31, 2012 were driven primarily by strength in our Asia and Middle East region, most notably Japan, which saw an increase in net sales of 41.7% due to strong growth in sales of both infrastructure equipment and services as a result of the 4G (LTE) roll-outs by mobile operators in Japan, which represented a combination of organic growth and the impact of the Acquired Motorola Assets. These positive developments were partially offset by decreases in net sales in India and Greater China as a result of reduced operator spending. Our net sales in the Americas region also increased 2.6%, led by an increase in net sales in North America of 18.0% driven by the 4G (LTE) network roll-out with our customer T-Mobile USA partially offset by a decrease in net sales in Latin America. Overall growth in net sales in these regions was offset by lower sales in our Europe and Africa region, which overall decreased by 12.0% in the year ended December 31, 2012 as compared to year ended December 31, 2011, due to the 19.5% and 17.3% decline in net sales in North East Europe and South East Europe, respectively, principally as a result of lower sales in services and infrastructure equipment.
36
Protability Our gross prot decreased to EUR 3 455 million in the year ended December 31, 2012, compared with EUR 3 708 million in the year ended December 31, 2011, with a gross margin of 25.8% (27.2% in the year ended December 31, 2011). The decrease in gross margin was primarily attributable to specic items recorded in cost of sales which increased to EUR 653 million in the year ended December 31, 2012 (EUR 51 million in the year ended December 31, 2011), due to the recording of personnel restructuring costs in connection with our restructuring program and additional costs incurred during the period as we realigned our customer contract and geographic market portfolio to terminate certain loss-generating and poorly performing contracts and to withdraw from certain countries in line with the transformation and restructuring program. Our gross prot before specic items increased to EUR 4 108 million in the year ended December 31, 2012, compared with EUR 3 759 million in the year ended December 31, 2011, with a gross margin before specic items of 30.7% (27.5% in the year ended December 31, 2011), as a result of our strategy to focus on mobile broadband and products and services with higher margins and to exit less protable contracts and countries as well as, in the second half of the year, due to the sale of an unusually large proportion of higher margin products and software in our priority markets. Research and development expenses R&D expenses were EUR 2 116 million in the year ended December 31, 2012, compared with EUR 2 076 million in the year ended December 31, 2011. In the year ended December 31, 2012, R&D expenses included specic items relating to restructuring and other related charges of EUR 170 million (EUR 28 million in the year ended December 31, 2011) and purchase price accounting related items of EUR 38 million (EUR 79 million in the year ended December 31, 2011). In 2012, the restructuring and related charges related to expenses in connection with the reduction in our global workforce. In 2012 and 2011, purchase price accounting charges related to the amortization of nite lived intangible assets (customer relationships, developed technology and licenses to use tradenames and trademarks) recognized in the purchase price allocation stemming from the Groups formation and the subsequent acquisition of the Acquired Motorola Assets. R&D expenses before specic items decreased in the year ended December 31, 2012 to EUR 1 908 million and 14.3% of net sales compared to EUR 1 969 million and 14.4% of net sales in the year ended December 31, 2011 due to the divestment of our non-core assets and the elimination of related R&D expenses and our cost control initiatives relating to the transformation and restructuring program that was implemented in 2012 whereby we decreased investment in previous-generation radio technologies and non-core portfolio areas.
Selling and marketing expenses Selling and marketing expenses decreased by 4.0% to EUR 1 267 million, in the year ended December 31, 2012, compared with EUR1320 million in the year ended December 31, 2011. In the yearended December 31, 2012, selling and marketing expenses included specic items relating to restructuring and other charges ofEUR 116 million (EUR 22 million in the year ended December 31, 2011) and purchase price accounting related items of EUR 266 million (EUR 308 million in the year ended December 31, 2011). In2012, restructuring and related charges were largely driven by expenses inconnection with the reduction in our global workforce. Inboth 2012 and 2011, purchase price accounting charges related tothe amortization of nite lived intangible assets (customer relationships, developed technology and licenses to use tradenames and trademarks) recognized in the purchase price allocation stemming from the Groups formation and the subsequent acquisition of the Acquired Motorola Assets. Selling and marketing expenses before specic items were EUR 885 million in the year ended December 31, 2012 compared to EUR 990 million in the year ended December 31, 2011, representing 6.6% and 7.3% of net sales, respectively. This decrease in selling and marketing expenses was primarily related to our implementing measures to reduce discretionary expenditure, and overall lower selling and marketing activities due to the impact of the transformation and restructuring program implemented in 2012. Administrative and general expenses Administrative and general expenses were EUR 695 million in the year ended December 31, 2012, compared with EUR 534 million in the same period of 2011. In the year ended December 31, 2012, administrative and general expenses included restructuring charges and other one-time charges of EUR 242 million (EUR 36 million in the same period of 2011) and purchace price accounting related items of EUR 0 million (EUR 1 million in the same period in 2011). In 2012, the restructuring and related charges related to expenses in connection with the reduction in our global workforce, exiting certain underperforming customer contracts and the withdrawal and closure of real estate sites as well as other charges consisting ofconsultancy fees in connection with the restructuring program. Administrative and general expenses before specic items decreased slightly in the year ended December 31, 2012 to EUR453million and 3.4% of net sales compared to EUR 497 million and 3.6% of net sales in the year ended December 31, 2011. This decrease in administrative and general expenses was primarily due to the restructuring efforts undertaken in connection with the transformation and restructuring program implemented in 2012.
Annual Report 2012
37
Other income and expenses, net Other income and expenses decreased to an expense of EUR 118 million in the year ended December 31, 2012 as compared to income of EUR 13 million in the year ended December 31, 2011 as we recorded a net loss of EUR 50 million from the sale of divested businesses, EUR 40 million in costs resulting from the sale of receivables transactions and EUR 28 million of additional expenses from the result of bad debt write-offs during 2012. Operating results We had an operating loss of EUR 741 million in the year ended December 31, 2012, compared with an operating loss of EUR 209 million in the year ended December 31, 2011, resulting in an operating margin of negative 5.5% and negative 1.5% in the years ended December 31, 2012 and 2011, respectively. Before specic items, we had operating prot of EUR 822 million in the year ended December 31, 2012 as compared to an operating prot of EUR 335 million in the year ended December 31, 2011. This increase in operating prot before specic items, year-on-year, was primarily attributable to our change in strategy and increased sales of higher margin products and to the reductions in expenses in connection with our cost control initiatives relating to the restructuring and transformation program implemented in 2012, as described above. Financial income and expenses, net, and other nancial results We incurred a net expense in nancial income and expenses, net, and other nancial results of EUR 307 million in the year ended December 31, 2012, compared with a net expense of EUR 151 million in the year ended December 31, 2011. In the year ended December 31, 2012, our nancial income and expenses, net, and other nancial results consisted of nancial income of EUR 15 million in the year ended December 31, 2012, offset by nancial expenses relating to interest expense on loans and credit facilities of EUR 113 million and net foreign
exchange losses of EUR 199 million. In the year ended December 31, 2011, our nancial income and expenses, net, and other nancial results consisted of nancial income of EUR 15 million, offset by nancial expenses relating to interest expense on our loans and credit facilities of EUR 95 million and net foreign exchange losses of EUR 58 million. The increase in net foreign exchange losses of EUR 141 million was primarily due to currency exposures that cannot be hedged. Income tax expense We had an income tax expense of EUR 342 million in the year ended December 31, 2012, compared with an income tax expense of EUR234 million in the year ended December 31, 2011. Despite incurring losses before tax of EUR 1 040 million in the year ended December 31, 2012 and EUR 377 million in the year ended December 31, 2011, we recorded an expense during 2012 and 2011 primarily due to the increase in valuation allowance on deferred tax assets of EUR 640 million and EUR 265 million, respectively, related to Finnish and German tax losses and temporary differences in 2012 and Finnish tax losses and temporary differences in 2011 for which we are unable to recognize deferred tax benets. Our effective income tax expense is also affected by the various tax laws in effect in the different jurisdictions in which we earn revenue. The increase in income tax expense also reects changes in prot mix between jurisdictions from year to year. Year ended December 31, 2011 compared with year ended December 31, 2010 Our operating results for the year ended December 31, 2011 includeeight months of the results of the Acquired Motorola Assets. Accordingly, our results for that period are not directly comparable toour results for the year ended December 31, 2010.
38
The following table sets forth selective line items from our consolidated income statement and the percentage of net sales that they represent for the years ended December 31, 2011 and 2010.
For the year ended December 31 2011 From continuing operations EURm, except percentage data Before specic items Percentage of net sales Before specic items 2010 Percentage of net sales
Specic items
Total
Specic items
Total
(%) change
Net sales Cost of sales Gross prot R&D expenses Selling and marketing expenses Administrative and general expenses Other income and expenses, net Operating prot/(loss) Share of results of associates Financial income and expenses, net, and other nancialresults Loss before tax Income tax expense Loss for the year from continuing operations
13 645 (9 886) 3 759 (1 969) (990) (497) 32 335
(51) (51) (107) (330) (37) (19) (544)
13 645 100.0% (9 937) 72.8% 3 708 (2 076) (1 320) (534) 13 (209) (17) (151) (377) (234) (611) 27.2% 15.2% 9.7% 3.9% 0.1% 1.5%
12 206 (8 767) 3 439 (1 804) (992) (459) (18) 166
(174) (174) (212) (307) (76) (27) (796)
12 206 100.0% (8 941) 73.3% 3 265 (2 016) (1 299) (535) (45) (630) 11 (248) (867) (164) (1 031)
11.8% 11.1%
26.7% 13.6% 16.5% 3.0% 10.6% 1.6% 4.4% (0.2)% 0.4% (128.9)% 5.2% (66.8)%
The following table sets forth Nokia Siemens Networks net sales for the years ended December 31, 2011 and 2010 by segment and current geographic area based on customer location. Nokia Siemens Networks selected segment data
From continuing operations EURm, except percentage data Mobile Broadband Global Services All other segments1 Other Total
2011 Net sales Operating prot/(loss) before specic items Operating prot/(loss) % before specic items 2010 Net sales Operating prot/(loss) before specic items Operating prot/(loss) % before specic items
1
6 335 214 3.4% 5 789 153 2.6%
6 737 229 3.4% 5 889 84 1.4%
573 (108) (18.8)% 528 (71) (13.4)%
13 645 335 2.5% 12 206 166 1.4%
All other segments represents the aggregated results of several businesses that were divested or that were planned to be divested during the period.
Annual Report 2012
39
Nokia Siemens Networks net sales by geographic area

From continuing operations EURm, except percentage data For the year ended December 31 2011 2010 (%) change
North East Europe West Europe South East Europe Africa Europe and Africa Middle East Greater China Japan India APAC Asia and Middle East North America Latin America Americas Total
1 107 2 032 1 257 579 4 975 817 1 457 1 533 911 1 176 5 894 1 018 1 758 2 776 13 645
1 086 2 115 1 378 514 5 093 876 1 448 704 885 1 110 5 023 649 1 441 2 090 12 206
1.9% (3.9)% (8.8)% 12.6% (2.3)% (6.7)% 0.6% 117.8% 2.9% 5.9% 17.3% 56.9% 22.0% 32.8% 11.8%
Net sales Year-on-year, net sales growth was 11.8% for the year ended December 31, 2011 compared to the year ended December 31, 2010. The 11.8% increase in our net sales was driven primarily by the contribution from the Acquired Motorola Assets. The Acquired Motorola Assets contributed net sales of EUR 894 million in eight months of trading following the completion of the Motorola Solutions Acquisition on April 30, 2011. Excluding the Acquired Motorola Assets, net sales would have increased 4.5% year-on-year, primarily driven by growth in Global Services. Of total net sales, Mobile Broadband contributed EUR 6.3 billion in the year ended December 31, 2011 (EUR 5.8 billion in the year ended December 31, 2010) and Global Services contributed EUR 6.7 billion in the year ended December 31, 2011 (EUR 5.9 billion in the year ended December 31, 2010). In 2011, we continued to see growth in both the Mobile Broadband and Global Services business units. Growth in the Mobile Broadband business was primarily driven by sales of GSM and WCDMA technology as network upgrade, expansion and roll-out work continued across a number of regions. In Global services, managed services remained a strong trend in the industry, while the network implementation business, which is very closely linked to the Mobile Broadband business, also grew.
Net sales in West Europe accounted for our largest concentration of net sales in the year ended December 31, 2011, representing 14.9% of our net sales (17.3% in the year ended December 31, 2010). Other regions contributing signicant percentages of net sales in the year ended December 31, 2011 include Latin America 12.9% (11.8% in the year ended December 31, 2010), Japan 11.2% (5.8% in the year ended December 31, 2010) and Greater China 10.7% (11.9% in the year ended December 31, 2010). On a regional basis, net sales in the year ended December 31, 2011 were driven primarily by strength in the Americas region where North America and Latin America sales increased by 56.9% and 22.0% respectively, as compared to the year ended December 31, 2010, where sales were boosted by the acquisition of the Acquired Motorola Assets, primarily in the CDMA business with Verizon. Our net sales in Asia and the Middle East also increased by 17.3% in the year ended December 31, 2011 as compared to the year ended December 31, 2010, primarily driven by the increase in sales in Japan. In Japan, net sales increased by 117.8% as our existing business continued to be driven by the network roll-out with our customer SoftBank and with the Motorola Solutions Acquisition, we further strengthened our position in this key market by gaining KDDI as a new customer. Growth in net sales in these regions was offset by a decrease in net sales in our Europe and Africa region where net sales decreased 2.3% since the prior year due to difcult conditions in Europe. In particular, West and South Europe continued to be characterized by intense competition for market share around single Radio Access Network (RAN) projects resulting in an impact on our pricing.
40
Protability Our gross prot increased to EUR 3 708 million in the year ended December 31, 2011, compared with EUR 3 265 million for the year ended December 31, 2010, with a gross margin of 27.2% (26.7% in the year ended December 31, 2010). The increase in gross margin was inuenced by a decrease in specic items recorded in cost of sales, which decreased to EUR 51 million in the year ended December 31, 2011 (EUR 174 million in the year ended December 31, 2010) due to the recording of additional personnel restructuring and structural restructuring for outsourcing and closing manufacturing sites and other real estate locations in 2010. Our gross prot before specic items increased to EUR 3 759 million in the year ended December 31, 2011, compared with EUR 3 439 million in the year ended December 31, 2010, with a gross margin before specic items of 27.5% (28.2% in the year ended December 31, 2010) due to the impact from the Acquired Motorola Assets which was partially offset by the growth in our Global Services business unit, which generally has lower gross margins than our other products. R&D expenses were EUR 2 076 million in the year ended December 31, 2011, compared with EUR 2 016 million for the year ended December 31, 2010. In the year ended December 31, 2011, R&D expenses included specic items relating to restructuring and other related charges of EUR 28 million (EUR 19 million in the year ended December 31, 2010) and purchase price accounting related items of EUR 79 million (EUR 193 million in the year ended December 31, 2010). In 2011 and 2010, purchase price accounting charges related to the amortization of nite lived intangible assets (customer relationships, developed technology and licenses to use tradenames and trademarks) recognized in the purchase price allocation stemming from the Groups formation and the subsequent acquisition of the Acquired Motorola Assets. R&D expenses before specic items increased in the year ended December 31, 2011 to EUR 1 969 million and 14.4% of net sales compared to EUR 1 804 million and 14.8% of net sales in the year ended December 31, 2010, primarily due to additional R&D expenses due, to the consolidation of the Acquired Motorola Assets and related R&D activities in 2011.
Selling and marketing expenses In the year ended December 31, 2011, our selling and marketing expenses increased slightly by 1.6% to EUR 1 320 million, compared with EUR 1 299 million in the year ended December 31, 2010. In the year ended December 31, 2011, selling and marketing expenses included specic items relating to restructuring and other charges of EUR 22 million (EUR 21 million in the year ended December 31, 2010) and purchase price accounting related items of EUR 308 million (EUR 286 million in the year ended December 31, 2010). In 2011 and 2012, purchase price accounting related items consist of the amortization of nite lived intangible assets related both to the Groups formation and the subsequent Motorola Solutions Acquisition. Selling and marketing expenses before specic items were EUR 990 million in the year ended December 31, 2011 compared to EUR 992 million in the year ended December 31, 2010, representing 7.3% and 8.1% of net sales, respectively. Despite consolidation of eight months of the Acquired Motorola Assets and related selling and marketing activities in 2011, selling and marketing expenses before specic items remained relatively consistent year-on-year due to restructuring measures originally announced in November 2009. Administrative and general expenses In the year ended December 31, 2011, administrative and general expenses were EUR 534 million (EUR 535 million in the year ended December 31, 2010) representing 3.9% of our net sales (4.4% in the year ended December 31, 2010). Administrative and general expenses for the year ended December 31, 2011 included restructuring charges and merger-related charges of EUR 36 million (EUR 76 million in the year ended December 31, 2010) and purchase price accounting related items of EUR 1 million (EUR 0 million in the year ended December 31, 2010). Restructuring charges in 2011 consisted primarily of personnel restructuring charges. Mergerrelated charges related to additional costs incurred for the realignment of the product portfolio. Administrative and general expenses before specic items were EUR 497 million and 3.6% ofnet sales in the year ended December 31, 2011 compared to EUR459 million and 3.8% of net sales in the year ended December 31, 2010. This decrease in our administrative and general expenses as a percentage of net sales was primarily due to restructuring efforts subsequent to the acquisition of the Motorola Acquired Assets.
Annual Report 2012
41
Other income and expenses, net Other income and expenses, net increased to income of EUR 13 million in the year ended December 31, 2011 as compared to an expense of EUR 45 million in the year ended December 31, 2010 as we recorded other income of EUR 92 million and other expenses of EUR 79 million in the year ended December 31, 2011 as compared to other income of EUR 97 million and other expenses of EUR 142 million in the year ended December 31, 2010. The decrease in other expenses in the year ended December 31, 2011 was primarily attributable to our recording in 2010 other expenses of EUR 28 million in charges related to the transfer of the Groups Italian Radio Access activities to an IT consulting and solutions company. Operating results We had an operating loss of EUR 209 million in the year ended December 31, 2011, compared with an operating loss of EUR 630 million in the year ended December 31, 2010, resulting in operating margins of negative 1.5% and negative 5.2% in the years ended December 31, 2011 and 2010, respectively. Before specic items, we had operating prot of EUR 335 million in the year ended December 31, 2011 as compared to an operating prot of EUR 166 million in the year ended December 31, 2010. This increase in operating prot before specic items, year-on-year, was primarily attributable to an increase in net sales from the Motorola Solutions Acquisition, additional growth in net sales from our other business units and lower operating expenses in connection with certain restructuring activities as originally announced in November 2009. Financial income and expenses, net, and other nancial results We incurred a net expense in nancial income and expenses, net, and other nancial results of EUR 151 million in the year ended December 31, 2011, compared with a net expense of EUR 248 million in the year ended December 31, 2010. In the year ended December 31, 2011, our nancial income and expenses, net, and other nancial results consisted of nancial income of EUR 15 million, offset by nancial expenses relating to interest expense on interestbearing liabilities of EUR 95 million and net foreign exchange losses of EUR 58 million. In the year ended December 31, 2010, nancial income was EUR 14 million, interest expense on interest-bearing liabilities and other nancial expenses was EUR 157 million and net foreign exchange losses were EUR 105 million. The decrease in interest expense on interest-bearing liabilities of EUR 42 million was primarily due to the reduction in interest expense resulting from the shareholder loan conversions in 2010. The decrease in net foreign exchange losses of EUR 47 million was primarily due to decreased net foreign exchange losses primarily from currency exposures which cannot be hedged.
Income tax expense We had an income tax expense of EUR 234 million in the year ended December 31, 2011, compared with an income tax expense of EUR 164 million in the year ended December 31, 2010. Despite incurring losses before tax of EUR 377 million in the year ended December 31, 2011 and EUR 867 million in the year ended December 31, 2010, we recorded an expense during 2011 and 2010 primarily due to the increase in valuation allowance on deferred tax assets of EUR 265 million and EUR 278 million, respectively, related to Finnish tax losses and temporary differences for which we are unable to recognize deferred tax benets. Our income tax expense is also affected by the various tax laws in effect in the different jurisdictions in which we earn revenue. The increase in tax expense also reects changes in prot mix between jurisdictions from year to year. Liquidity and capital resources Liquidity describes the ability of a company to generate sufcient cash ows to meet the cash requirements of its business operations, including working capital needs, capital expenditures, debt service obligations, other commitments, contractual obligations and acquisitions. Our primary sources of liquidity are provided by our cash from operations, long and short-term nancings and historical shareholder support. Our liquidity requirements arise primarily to fund our future working capital needs, capital expenditures, R&D expenditures and to meet our debt services obligations. Certain of our subsidiaries operate in jurisdictions highly regulated bylocal central banks or international regulations, such as Iran, Pakistan, Venezuela and Uzbekistan. In these countries, the ability ofour subsidiaries to transfer funds to their parent companies or our Group treasury in the form of cash dividends, loans or advances is very limited. We estimate that the funds retained in these countries for relatively long periods of time have uctuated between EUR 50 million to 150 million in the periods under review. We believe that these limitations have not had and are not expected to have a material impact on our ability to meet our cash obligations.
42
Cash ows At December 31, 2012, our cash and cash equivalents were EUR2418million compared to EUR 1 613 million at December 31, 2011. The table below sets forth information regarding our cash ows from continuing and discontinued operations for the years ended December 31, 2012, 2011 and 2010.
For the year ended December 31 EURm 2012 2011 2010
Our net cash used in investing activities was EUR 261 million for the year ended December 31, 2012. This was primarily attributable to cash used for capital expenditures of EUR 216 million and payments in connection with the disposal of businesses and Group companies of EUR 125 million during the period. These cash outows were partially offset by cash inows of EUR 64 million primarily in connection with a purchase price adjustment relating to the Motorola Solutions Acquisition, net of acquired cash and proceeds from investments and other miscellaneous cash outows and inows. Our net cash used in nancing activities was EUR 520 million for the year ended December 31, 2012. During the year we repaid EUR 264 million of long-term interest-bearing liabilities, primarily consisting of scheduled repayments of EUR 100 million of our EIB Facility and EUR 44 million scheduled repayments of our Finnish Pension Loan and the voluntary prepayment of EUR 118 million and termination of our SEB Loan. During 2012, we also repaid EUR 244 million of short-term borrowings, primarily consisting of partial repayment of our Term Loan, renancing of our South African preference share subscription agreement and reduction of borrowings under the Commercial Paper Program and local borrowings on committed and uncommitted bases.
Statement of cash ows information: Net cash from operating activities Net cash used in investing activities Net cash (used in)/from nancing activities Net increase in cash andcash equivalents Capital expenditures1 Change in net working capital: Decrease in current receivables Decrease/(increase) in inventories Increase/(decrease) in interest-free liabilities2 Change in net working capital
1
1 628 (261) (520) 805 (216) 776 198 11 985
324 (989) 1 155 415 (303) 528 (44) (468) 16
3 (244) 641 438 (306) 852 (209) (415) 228
Capital expenditures represent purchases of property, plant and equipment and intangible assets. Includes changes in the following line items in the statement of nancial position: accounts payable, accrued expenses, provisions and other short-term liabilities.
The cash outows for restructuring and other specic items, excluding impairments and PPA related charges were EUR 645 million, EUR 188 million and EUR 510 million for the years ended December 31, 2012, 2011 and 2010, respectively. Year ended December 31, 2012 Our net cash from operating activities was EUR 1 628 million for the year ended December 31, 2012. Although we recorded a loss for the year of EUR 1 445 million, after adjusting for non-cash items, such as depreciation and amortization, which was EUR 587 million and restructuring and other specic items, which were EUR 1 162 million, we had cash ows from operating activities before changes in working capital of EUR 1 160 million. The change in our net working capital provided cash ows of EUR 985 million, which was a net reduction in working capital for the year. The reduction in net working capital resulted primarily from our management of accounts receivable which provided cash ow of EUR 776 million primarily due to improved cash collections and an increase in sales of receivables during the year which further enhanced our cash collection efforts. A reduction in inventories during the year provided cash inows of EUR 198 and was the result of effective inventory management during the year.
Year ended December 31, 2011 Our net cash from operating activities was EUR 324 million for the year ended December 31, 2011. Although we recorded a loss for the year of EUR 698 million, after adjusting for non-cash items such as depreciation and amortization, which was EUR 711 million, and other non-cash items such as restructuring and other specic items, income taxes and nancial income and expenses, which totaled EUR 447 million, we had cash ows from operating activities before changes in working capital of EUR 564 million. The change in our net working capital provided cash ows of EUR 16 million, which was a net reduction in working capital for the year. The reduction in net working capital resulted primarily from our management and sales of accounts receivable which provided cash ow of EUR 528 million during the year but was offset by the reduction in interest-free liabilities of EUR 468 million, which was primarily attributable to a decrease in accrued expenses relating mainly to a reduction in our deferred revenue balance from the prior year, and an increase in inventories of EUR 44 million.. Our net cash used in investing activities was EUR 989 million for the year ended December 31, 2011. In connection with the Motorola Solutions Acquisition, we had a cash outow, net of acquired cash received, of EUR 781 million. In addition, cash used for capital expenditures for the period resulted in a cash outow of EUR 303 million. These outows were partially offset by proceeds from short-term and other long-term loan receivables and proceeds from the sale of property, plant and equipment and intangible assets. Our net cash from nancing activities was EUR 1 155 million for the year ended December 31, 2011. During 2011, we received proceeds from our shareholders of EUR 1 000 million in relation to issuing cumulative preferred shares, which represented the majority of our nancing activities. We also received net proceeds from short-term borrowings of EUR 232 million primarily from the EUR 2 000 million revolving credit facility from 2009. During 2011, we also made repayments of EUR 48 million of long-term interest-bearing liabilities, primarily from the Finnish Pension Loan, and payments of EUR 29 million in dividends to non-controlling interests. Year ended December 31, 2010 Our net cash from operating activities was EUR 3 million for the year ended December 31, 2010. Although we recorded a loss for the year of EUR 1,089 million, after adjusting for non-cash items such as depreciation and amortization, which was EUR 843 million, and other non-cash items such as restructuring and other specic items, income taxes and nancial income and expenses, which totaled EUR 558 million, we had cash ows from operating activities before changes in working capital of EUR 405 million. The change in our net working capital provided cash ows of EUR 228 million, which was a net reduction in working capital for the year. The reduction in net working capital resulted primarily from our management and sales of accounts receivable which provided cash ow of EUR 835 million during the year but was offset by the
reduction in interest-free liabilities of EUR 415 million, which was primarily attributable to reductions in total provisions relating mainly to product portfolio optimization, and an increase in inventories of EUR 209 million. Our net cash used in investing activities was EUR 244 million for the year ended December 31, 2010. This was primarily attributable to cash used for capital expenditures of EUR 306 million. These cash outows were partially offset by proceeds from short-term and other long-term loan receivables and proceeds from the sale of property, plant and equipment and other miscellaneous cash outows and inows. Our net cash provided by nancing activities was EUR 641 million for the year ended December 31, 2010. During 2010, we received proceeds of EUR 229 million from our short-term borrowings, primarily from the EUR 2 000 million Revolving Credit Facility from 2009 and the Commercial Paper Program, and EUR 414 million from our long-term interest-bearing liabilities, primarily from drawings under the Finnish Pension Loan, Nordic Investment Bank Facility and SEB Loan. Capital expenditures Cash used for capital expenditures related to the purchases of property, plant and equipment and intangible assets and primarily of (a) cash used for the maintenance, upkeep and replacement of assets in connection with the production and testing of our products (Capital Expenditure); (b) cash used for development and testing of new products in order to increase sales and protability (R&D Capital Expenditure); (c) cash used in our Global Services business unit (Global Services Expenditures); and (d) other capital expenditures for real estate and central functions (Other Capital Expenditure). Investments in 2010 and 2011 included the development of a new generation of radio platforms, the Multiradio generation, and associated infrastructure software which required signicant initial investments. In 2012, our focus on Mobile Broadband resulted in increased capital expenditure on new technologies offset by a reduction in investments in non-core areas, thus leading to a reduction in overall capital expenditure. In accordance with our current estimate, we expect the amount of capital expenditures during 2013 to be approximately EUR 150 million, to be funded from cash ow from operating activities.
Capital Expenditure EURm For the year ended December 31 2012 2011 2010
Capital Expenditure R&D Capital Expenditure Global Services Expenditure Other Capital Expenditure Total
20 113 21 62 216
48 138 27 90 303
44 144 35 83 306
44
Capital resources Our principal sources of funds are expected to be cash provided by operations and amounts available under the Forward Starting Credit Facility, our Commercial Paper program and our local credit facilities. As of December 31, 2012, we have EUR 1 805 million in committed facilities, of which EUR 750 million is undrawn. Drawings under the Revolving Credit Facility will be available only if, among other things, we comply with the nancial and other covenants in the Revolving Credit Facility. Our ability to meet these nancial covenants will depend on our results of operations, which may be affected by factors outside our control. We will continue to work towards our long-term nancial goals whichinclude longer term nancing as a way to diversify our fundingsources. Contractual obligations The following table sets forth our material contractual obligations at December 31, 2012.
Contractual obligations EURm Total Less than 1 year 1-5 More than years 5 years
Structured nance Structured nance includes customer nancing and other third-party nancing. Network operators in some markets sometimes require their suppliers, including us, to arrange, facilitate or provide long-term nancing as a condition to obtain or bid on infrastructure projects. Credit markets in general have been tight since 2009. Requests for customer nancing and especially extended payment terms have remained at a reasonably high level; however, during 2012, the amount of nancing provided directly to our customers has decreased. We do not currently intend to materially increase nancing directly to our customers, which may have an adverse effect on our ability to compete successfully for their business. Rather, as a strategic market requirement, we plan to continue to arrange and facilitate nancing, typically supported by export credit or guarantee agencies, and provide extended payment terms to a number of customers. Extended payment terms may continue to result in a material aggregate amount of trade credits, but the associated risk is mitigated by the fact that the portfolio relates to a variety of customers. The following table sets forth our total customer nancing, outstanding and committed, for the years indicated.
Customer nance EURm At December 31 2012 2011 2010
Forward Starting Facility European Investment Bank Nordic Investment Bank Finnish Pension Loan PSA1 Commercial Paper Program Operating leases Purchase commitments2 Other obligations Total
1
600 150 80 132 44 82 474 799 52 2 413
100 45 44 82 141 509 48 969
600 50 35 88 44 231 290 4 1 342
102 102
Financing commitments Outstanding long-term loans (net of allowances and write-offs) Current portion of outstanding long-term loans (net of allowances andwrite-offs) Total
34 39
86 60
85 64
35 108
54 200
39 188
PSA relates to the amount outstanding under the PSA 2012 South African Preference Shares Subscription Agreements. 2 Purchase commitments relate to commitments from service agreements, outsourcing arrangements and inventory purchase obligations, primarily for purchases in 2013 through 2014.
Annual Report 2012
45
We continue to make arrangements with nancial institutions and investors to sell the credit risk that we have incurred from the commitments and outstanding loans we have made, as well as from the nancial guarantees we may have given. Should the demand for customer nance increase in the future, we intend to further mitigate our total structured nancing exposure, market conditions permitting. In the years ended December 31, 2012, 2011 and 2010 we had no material bad debt allowances or write-offs. We expect our structured nancing commitments to be nanced mainly through the capital markets as well as through cash ow from operations. The structured nancing commitments are available under loan facilities mainly negotiated with mobile operator customers to fund capital expenditure relating to the purchase of our network infrastructure equipment and services. Availability of the amounts is dependent upon the borrowers continuing compliance with stated nancial and operational covenants and compliance with other administrative terms of the facilities. Contingent obligations and liabilities At December 31, 2012, guarantees provided to certain customers of the Group in the form of bank guarantees, or corporate guarantees issued by some of the Groups entities were EUR 864 million (EUR1191 million at December 31, 2011), including commercial guarantees of EUR 598 million (EUR 997 million at December 31, 2011). These instruments entitle the customer to claim payment as compensation for non-performance by the Group of its obligations under network infrastructure supply agreements.
At December 31, 2012, other guarantees on behalf of other companies were EUR 11 million (EUR 0 million at December 31, 2011). These guarantees represented commercial guarantees issued on behalf of third parties. The increase in volume is mainly due to the transfer of guarantees in connection with the disposal of certain businesses where contractual risks and revenues have been transferred, but some of the commercial guarantees have not yet been re-assigned legally. Off-balance sheet arrangements We have no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our nancial condition, changes in nancial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
46
Making the connections

An innovative approach proach to LTE helps us minimize our environmental al impact and our costs.
Tommy Ljunggren , ment Vice President of System Development at Mobility Services, TeliaSonera
Read more about our work with Telia in our online Annual Report
Country: Sweden Number of subscribers: Telia in Sweden is part ofTeliaSonera group, which has 20 millionmobile subscribers globally Strategic focus: The leading Swedish operator of mobile communication, xed communication and data communication as well as broadband
47
Business review Corporate responsibility
Understanding our impact
Our highlights
12.5%
At the end of 2012, 12.5% of seniormanagement positions were held by women
Corporate responsibility covers a wide range of aspects including how we are run, how we interact with the communities in which we operate, and the impact we have on the environment.
Our people Workforce balancing Our restructuring program which we are halfway through has had a signicant effect on employees. We have been consulting with employee representatives including local Works Councils where necessary and we have communicated to employees the changes that affect them throughout the two-year restructuring. We have followed country-specic legal requirements to nd socially responsible means of reducing our workforce and of helping affected employees. Where possible, we have offered alternative employment to people whose roles were being removed. As of December 31, 2012, we had approximately 58 400 employees. During the year, the rate of voluntary attrition was 9.9%. The rate of involuntary attrition was 14.2% and the rate ofattrition due to common agreement was 5.8%. Diversity and inclusion At the end of 2012, 12.5% of senior management positions were held by women, an increase of one percentage point from 2011. As a company with Finnish and German heritage, Nokia Siemens Networks also monitors the nationality of our managers: at the end of 2012, 54% of senior management positions were held bypeople without Finnish or German nationality. Training and development During 2012, we spent approximately EUR 50 million on training for employees. Health, safety and labor conditions Our Code of Conduct and Global Labor Standard set out clear requirements for labor conditions, based on the International Labor Organization (ILO) conventions. We are implementing theglobal standard at a country level, focusing on the highest riskcountries for labor violations. Internal audits are used to conrm compliance. Our health and safety management system is based on the international standard OHSAS 18001. Contractors must also comply with our health and safety standards, and we provide training to contractors to facilitate this. Regular audits are used tocheck compliance. In 2012, there were 151 health and safety incidents recorded (down from 214 in 2011). We continue to aspire to a completely safe, accident-free environment for our workers.
50 million
Spent on employee training
29%
Reduction in number of health and safety recordable incidents
All indicators in this section of the Annual Report have been assured by DNV Two Tomorrows.
48
Nokia Siemens Networks Code of Conduct The Code of Conduct establishes the ethical standards we expect our people to meet, wherever they work. We train our employees annually on ethical business conduct, and concerns can be reported anonymously. Any reported issue is investigated by our Ethics and Compliance Ofce. Suppliers Our global supplier requirements, which set standards in ethical, environmental and social issues, form part of contractual agreements with suppliers and must be met by every Nokia Siemens Networks supplier. The requirements are frequently updated: in 2012, we introduced additional points on human rights and conict minerals. Compliance is monitored through system audits, of which 57 were conducted in 2012. More detailed audits are undertaken with some suppliers, selected through a risk assessment process. During the course of 2012, we completed 20 of these in-depth audits and initiated afurther two. Nokia Siemens Networks has a zero tolerance policy on conict minerals and we expect our suppliers to transmit that in turn to their suppliers. In 2012, we approached 125 suppliers for due diligence, as part of our involvement in the EICC/GeSI Extractives Working Groups Conict-Free Smelters program, completing due diligence with 40 of them. Environment Nokia Siemens Networks environmental strategy has two key elements: Designing products and services that help telecoms operators reduce the environmental impact of their networks Ensuring maximized efciency in our operations to minimize our environmental impact We operate an environmental management system certied to the internationally recognized standard ISO 14001. We require suppliers to have a documented Environmental Management System compliant with ISO 14001 in place. Nokia Siemens Networks portfolio reduces the environmental impact of new and legacy telecommunications networks through more efcient technology and renewable energy solutions to reduce power consumption and greenhouse gas emissions. By the end of 2012, Nokia Siemens Networks had improved the energy efciency of GSM base station products by 21%1 and reduced the energy consumption of buildings by 8%2, compared to 2007 levels.
1 2
This over-achieves on a commitment made ve years ago on GSM base station. We have so far applied energy efcient measures to more than 4 200 radio mobile broadband sites. Renewable energy continues to form a substantial part of the energy used in Nokia Siemens Networks own facilities over 38% of our energy usage is from certied renewable sources. Radio waves and health Wireless communication technologies operate well within the limits recommended by the International Commission on Non-Ionizing Radiation Protection and endorsed by the World Health Organization, and we work to ensure continued compliance of ourproducts with these requirements. Nokia Siemens Networks engages with its stakeholders and in public discussions on this topicas well as monitoring scientic studies. Society Human rights We recognize our responsibility to help ensure that our products are used in a way that respects human rights. Our Code of Conduct spells out our zero tolerance for the violation of human rights. This commitment is reinforced in our human rights policy, which establishes due diligence processes to identify and address relevant risks across our global operations. Employees are trained in human rights through ethical business training, and those in high-risk roles such as procurement are given additional training. Community Nokia Siemens Networks community strategy focuses on three key areas where we can have the greatest impact: education and Information Communications Technology, disaster preparedness and relief, and the environment. We have policies in place relating to disaster relief and to employee volunteering.
rom best performance BTS to 2012 equivalent capacity conguration BTS. F Compared to a business as usual scenario created in 2007 as agreed with the WWF.
For more information, please see our sustainability report online.
Annual Report 2012
49
Business review Risk factors
Understanding the risks we face

Every business activity brings with it a degree of risk, and the Board recognizes that Nokia Siemens Networks must therefore manage a range of risks in the course of its activities. This section provides a description of the principal risk factors that could affect Nokia Siemens Networks as we try to reach our business objectives. Our internal risk management is designed to identify and analyze these risks, as well as to control them within acceptable parameters. The factors described below are not intended to form a denitive list of all risks and uncertainties. In particular, the list excludes generic risks common to many companies, such as terrorism, pandemics and succession planning. There may be additional risks unknown tous and other risks currently believed to be immaterial that could become material. These risks, either individually or together, could adversely affect our business, sales, results of operations and nancial condition from time to time. The summary below covers all risk areas such as strategic, operational, nancial and hazard risks: 1 Our sales and protability depend on our success in the mobilebroadband infrastructure and related services market. We may fail to effectively and protably adapt our business and operations in a timely manner to the increasingly diverse needs of our customers in this market. 2 Competition in the mobile broadband infrastructure and related services market is intense. We may be unable to maintain or improve our market position or respond successfully to changes in the competitive environment. 3 O ur restructuring plan to improve nancial performance and competitiveness may not lead to sustainable improvements in our overall competitiveness and protability, and we may be unable otherwise to continue to reduce operating expenses and other costs. The costs, cash outows and charges related to the implementation of the restructuring plan, including the planned personnel reductions, divestments of non-core businesses, the termination of unprotable contracts and exiting certain countries, such as Iran, may be greater than currently estimated. 4 We may require further support from our shareholders and may have conicts of interest with them. Our shareholders may also have conicts of interests between themselves. We believe that our shareholders are actively considering a number of strategic alternatives in respect of their interests in Nokia Siemens Networks B.V., including new investments by third parties and anincrease or decrease in the shareholders ownership interests in Nokia Siemens Networks. There can be no assurance of any such intentions or the timing of any such plans, nor can there be any assurance that the ownership of Nokia Siemens Networks B.V. will, or will not, change in the future. 5 Lack of improvement of or worsening general economic and nancial markets conditions globally and regionally could have a signicant adverse impact on our business, the results of operations, and our nancial condition. 6 As the euro is our reporting currency, the dissolution of the euro would result in increased costs to adjust our nancial reporting, and result in increased volatility in our reported results of operations and nancial condition. 7 We may fail to effectively and protably invest in new competitive products, services, upgrades and technologies and bring them to market in a timely manner.
8 There are a limited number of customers in the networks infrastructure and related services business. Unfavorable developments in relation to a major customer may have a material adverse effect on our business, results of operations and nancial condition. 9 The mobile broadband infrastructure and related services business relies on large multi-year contracts. Unfavorable developments under such contracts may have a material adverse effect on our business, results of operations and nancial condition. 10 We may not be able to successfully consummate acquisitions ordivestitures or integrate acquired businesses, and any acquisitions or disposals may carry unanticipated liabilities. 11 We are exposed to local business risks in the countries in which we operate. Our sales derived from, and our manufacturing facilities and assets located in, emerging market countries maybe materially adversely affected by economic, regulatory and political or other developments in those countries, or by other countries imposing regulations against imports to such countries. As sales from those countries represent a signicant portion of our total sales, economic or political turmoil including sudden devaluation of currency in those countries could materially adversely affect our sales and results of operations. Our investments in emerging market countries may also be subject to other risks and uncertainties including challenges in repatriation of cash. Business with customers in Iran has recently become subject to signicant further regulation by the European Union, the United Nations and the USA. Our Executive Board has decided to withdraw from Iran in a controlled manner, and we are in the process of winding down our business activities there. We expect to cease all revenuegenerating activities relating to Iran by June 30, 2013. Other activities relating to the withdrawalsuch as dissolution of thelocal branch, divestment or discontinuation of certain shareholdings, closing of local bank accounts and resolution ofcontractual and legal obligations in Iranwill take longer. Despite this withdrawal, we may still be subject to new, existing, or tightened export control regulations, sanctions, embargoes or other forms of trade restrictions imposed on Iran. Additionally, we may be exposed to customer claims and other actions as well as investigations by authorities. The result of such claims, actions and investigations may be difcult to predict and can lead to lengthy disputes, nes or settlements, and could have amaterial adverse affect on the results of operations and our nancial condition. Our liquidity and our ability to meet our working capital 12 requirements depend on access to available credit under our nancing arrangements and other credit lines as well as cash at hand. Ifthose sources of liquidity were to be unavailable, or cannot be renanced when they mature, this would have a material adverse effect on our business, the results of operations, and our nancial condition. 13 If the limited number of suppliers we depend on fail to deliver sufcient quantities of fully functional products, components, sub-assemblies and software on favorable terms and in compliance with our supplier requirements, our ability to deliverour products and services protably, in line with qualityrequirements and on time, could be materially adverselyaffected.
14 If any of the companies we partner and collaborate with were tofail to perform as planned, or if we fail to achieve the collaboration or partnering arrangements needed to succeed, we may not be able to bring our products and services to market successfully or in a timely way. 15 We may fail to manage our manufacturing, service creation, delivery and logistics efciently and without interruption, or fail tomake timely and appropriate adjustments, or fail to ensure thatour products and services meet our and our customers requirements, and are delivered on time and in sufcient volumes. 16 Rapid changes to existing regulations or technical standards or the implementation of new regulations or technical standards forproducts and services not previously regulated could be disruptive, time consuming and costly to us. 17 Providing customer nancing or extending payment terms to customers can be a competitive requirement in the networks infrastructure and related services business and may have a material adverse effect on our business, results of operations and nancial condition. 18 Any actual or alleged defects or other quality, safety and security issues in our products and services could have a material adverse effect on our sales, results of operations and reputation. 19 We have operations in a number of countries and, as a result, face complex tax issues that could result in the obligation to payadditional taxes in various jurisdictions. 20 We may be liable for any actual or alleged loss, improper disclosure or leakage of any personal or consumer data collected by us or our partners or subcontractors, made available to us or stored in or through our products and services. 21 Our net sales, costs and results of operations are affected by exchange rate uctuations, particularly between the euro, which is our reporting currency, and the US dollar, as well as with and between other currencies. 22 Our products and services include increasingly complex technologies, some of which have been developed by us or licensed to us by third parties. As a consequence, evaluating therights related to the technologies we use or intend to use is increasingly challenging, and we expect increasingly to face claims that we have infringed third parties intellectual property rights. The use of these technologies may also result in increased licensing costs for us, restrictions on our ability to use certain technologies in our products and services, and/or costly and time consuming litigation. 23 Our existing technology licenses may expire or otherwise become subject to renegotiation. The inability to renew or nalize such arrangements on acceptable commercial terms may result in increased costs or other changes in terms that could potentially have a material adverse effect on our operating results and nancial condition. 24 Our products and services include numerous patented, standardized or proprietary technologies, which we rely upon. Third parties may use without a license or unlawfully infringe our intellectual property, or commence actions seeking to establish the invalidity of the intellectual property rights of these technologies. This may have a material adverse effect on our business and results of operations.
25 Changes in various types of regulation and trade policies as well as enforcement of such regulation and policies in countries around the world could have a material adverse effect on our business and results of operations. In line with changes in strategy, as well as in some cases a difcult political or business environment and an increasingly complicated trade sanctions environment, we have reduced operations and have exited or are in the process of exiting certain countries, such as Iran. Suchactions may trigger additional investigations or claims by contracting parties. The result of such investigations or claims may be difcult to predict and could lead to lengthy disputes or nes or a settlement. 26 Our operations rely on the efcient and uninterrupted operation of complex and centralized information technology systems and networks, which are integrated with those of third parties. All information technology systems, system upgrades and system transitions are potentially vulnerable to damage, malfunction orinterruption from a variety of sources that could materially adversely affect our business, nancial condition and results ofoperations. 27 We may be unable to retain, motivate, develop and recruit appropriately skilled employees. 28 Organized strikes or work stoppages by unionized employees may have a material adverse effect on our business, nancial condition and results of operations. 29 An unfavorable outcome of litigation, or the conduct of litigation while it is ongoing, could have a material adverse effect on our business, results of operations and nancial condition. 30 We are subject to environmental and health and safety laws that restrict our operations or increase the costs of such operations. 31 Allegations of possible health risks from the electromagnetic elds generated by base stations, and the lawsuits and publicity relating to this matter, regardless of merit, could have a material adverse effect on our sales, results of operations and reputation, by increasing difculty in obtaining sites for base stations, or by leading regulatory bodies setting arbitrary use restrictions and exposure limits, or by causing us to allocate additional monetary and personnel resources to these issues. 32 We may be required to make further contributions to pension plans. 33 Some of the Siemens carrier-related operations transferred toushave been and continue to be the subject of criminal and other governmental investigations related to whether certain transactions and payments arranged by some current or former employees of Siemens were unlawful. As a result of those investigations, government authorities and others have taken and may take further actions against Siemens and/or its employees that may involve and affect the assets and employees transferred by Siemens to us, or there may be undetected additional violations that may have occurred prior tothe transfer or violations that may have occurred after the transfer of such assets and employees. For further explanation of these risks, please refer to Nokias 20-F ling, which includes risks relating to Nokia Siemens Networks. Acopy can be found at nokia.com/investors.
Annual Report 2012
51
Innovative partnership
We are using innovation to differentiate ourselves in our markets.
Thibaud Rerolle, Head of Technology, Safaricom
Read more about our work with Safaricom in our online Annual Report
Country: Kenya Number of customers: 19 million Strategic focus: Innovation to maintain a competitive edge
Governance
54 Corporate Governance
Corporate Governance
Ensuring the clarity of our decision making
Given the deep and far-reaching transformation underway at Nokia Siemens Networks, now is the time forus to share our new strategy, organizational structure and nancial progress directly through this, our own comprehensive Annual Report. This publication denes who we are, what we do, and what sets us apart from our peers. It also sets a new standard of transparency for us, as we share, for the rst time, information about the performance of our business at a segment level. As a leading global networks business, corporate governance isimportant to us. Because Nokia Siemens Networks is not a listed company, and reports through others, we do not formally adopt external governance codes, although of course we fulll therequirements of our parent companies. However, we have developed governance guidelines which set out the governance responsibilities of our Board of Directors. In March 2012, we made some major changes in how we govern, how decisions are made, and how we track the execution of our strategy. This move aimed to help us achieve our restructuring goals and, beyond that, to support our transformation in the longer term. The changes addressed what the senior management team focuses on and how it implements its decisions, and were designed to improve the speed and quality of decision making, as well as tracking the results of those decisions. Overall, our governance structure approach enables us to have a clear change management process for employees and a robust decision making process for shareholders.
Corporate governance isimportant tous as a leading global networks business.

Jesper Ovesen Chairman
54
Principal activities We began independent operations on April 1, 2007, combining Nokia Corporations (Nokia) networks business and Siemens AGs (Siemens) carrier-related operations for xed and mobile networks. In April 2011, we acquired the majority of the wireless network infrastructure assets of Motorola Solutions. Today we are a leading global provider of telecommunications infrastructure, with a focus on the mobile broadband market. In ourcore addressable market, we are the second largest company worldwide by revenue. We have a strong position in the newer infrastructure technologies of 3G and 4G (LTE), and in LTE, we had77 commercial contracts at the end of 2012. Business review A review of our principal activities and performance for the year is contained in the 2012 highlights on pages 6 and 7, A letter from our Chairman on page 8, the Chief Executive Ofcers strategic review on pages 12 to 15, Our strategy and transformation on pages 18 to 20, How we operate and Where we operate on pages 24 to 27, the Operating and Financial Review on pages 29 to 46, and the Corporate responsibilty report on pages 48 and 49. A review of the principal risks and uncertainties facing the Group is set out on pages50 and 51. Structure and management Nokia Siemens Networks B.V. is a private company with limited liability, registered in the Netherlands with its corporate seat in TheHague. Our operational headquarters is in Espoo, Finland, witha strong regional presence in Germany. Nokia Siemens Networks current shareholders are Nokia and Siemens. The Company has autonomy to carry on its business independently of its shareholders. The Company is consolidated inthe nancials of Nokia Corporation, and accounted on an equity basis by Siemens. Membership of the Board of Directors Our Board of Directors is comprised of seven directors, four of whom are appointed by Nokia and three of whom are appointed by Siemens. The appointed board members are employees of the parent companies, except for the Chairman of the Board.
The Chairman and Chief Executive Ofcer (CEO) are appointed by Nokia. The senior management team is appointed by the Chief Executive Ofcer. There were no loans granted to the members of the Board of Directors at December 31, 2012. The following table sets forth the names, ages and positions of the members of the Board of Directors as of December 31, 2012.
Membership of the Board of Directors
Name Age Title
Jesper Ovesen Juha krs Timo Ihamuotila Joe Kaeser Barbara Kux Louise Pentland Peter Y. Solmssen
55 47 46 55 58 40 57
Chairman Member of the Board Member of the Board Member of the Board Member of the Board Member of the Board Member of the Board
A short biography of each of the members of the Board of Directors is included below. Jesper Ovesen Jesper Ovesen is Chairman of our Board overseeing the strategic direction of Nokia Siemens Networks. Prior to joining in September 2011, Mr. Ovesen held a number of senior management positions inleading European companies, most recently serving as CFO of Danish telecommunications group TDC during the companys restructuring process and initial public offering. He also served as CEO at Kirkbi, CFO at Lego, and CFO at Danske Bank. He currently holds external positions as a member of the Board of Orkla Norway, and a member of the Board of Skandinaviska Enskilda Banken. Juha krs Juha krs is Executive Vice President at Nokia, Human Resources, responsible for their talent management, resourcing and development, performance management and organizational development. Mr. krs joined Nokia in 1993 and was appointed tothe Nokia Leadership Team in 2010. He served in various leadership positions including business, strategy, customer services, marketing and nance, before moving to Human Resources in 2005. Mr. krs holds a masters degree in engineering from Helsinki University of Technology.
Annual Report 2012
55
Corporate Governance continued
Timo Ihamuotila Timo Ihamuotila has been a member of the Nokia leadership team since 2007 and of our Board since November 2009. Mr. Ihamuotila joined Nokia in 1993 as Manager for Dealing & Risk Management. After a three-year period away, he rejoined Nokia in1999 as Director of Corporate Finance and was named Vice President Finance, Corporate Treasurer of Nokia Corporation, Group Treasury in 2000. In 2004, he became Senior Vice President for Nokias CDMA business unit, an integral part of the Mobile Phones business group. He was appointed Executive Vice President, Sales and Portfolio Management, Mobile Phones in 2007 and became responsible for Nokias global sales within the Markets unit in 2008. Prior to joining Nokia, he worked as an Analyst in Asset and Liability Management for the Kansallis Bank, Helsinki and from 1996 to 1999 he worked forCitibank Plc as Vice President of Nordic Derivatives Sales. Mr.Ihamuotila graduated from Helsinki School of Economics and holds a degree of Master of Science (Economics) and Licentiate of Science (Finance). Joe Kaeser In May 2006, Mr. Kaeser was appointed Member of the Managing Board of Siemens AG and Chief Financial Ofcer (CFO). Special Responsibilities within Siemens AG: Head of Corporate Finance and Controlling, Siemens Financial Services, Siemens Real Estate and Equity Investments. Prior to this, Mr. Kaeser served as chief strategy ofcer for Siemens AG from 2004 to 2006 and as the chief nancial ofcer for the mobile communications group from 2001 to 2004. Mr.Kaeser has additionally held various other positions within the Siemens group since he joined Siemens in 1980. Mr. Kaeser also serves on the Board of Directors of Allianz Deutschland AG, NXP Semiconductors N.V. and Bosch Siemens Hausgerte GmbH. Mr.Kaeser holds a business administration degree from Fachhochschule Regensburg. Barbara Kux Barbara Kux is a member of the Managing Board of Siemens AG since 2008. She is responsible for Supply Chain Management, Global Shared Services and serves as the companys Chief Sustainability Ofcer. Prior to joining Siemens she was as a member of the Group Management Committee at Royal Philips Electronics. Before she held top management positions at leading global companies and also served as Management Consultant at McKinsey & Company Inc. In 1995, she was included in the class of 1995 of Global Leaders of Tomorrow by the World Economic Forum in Davos, Switzerland. Barbara Kux is a member of the Board of Directors of Total S.A., France and a member of the Board of Trustees of the Siemens Foundation. Barbara Kux holds an MBA with Distinction from INSEAD Fontainbleau, France.
Louise Pentland Louise Pentland is Executive Vice President, Chief Legal Ofcer at Nokia, responsible for legal matters and protecting and enforcing the companys vast portfolio ofpatents and other intellectual property. Ms. Pentland joined Nokia Networks in the United Kingdom in 1998 as Senior Legal Counsel, and has since held positions within Nokia including Senior Vice President and Chief Legal Ofcer, Acting Chief Legal Ofcer, Vice President and Head of Legal, Enterprise Solutions. She has been amember of the Nokia Leadership Team since 2011. Before joining Nokia, Ms. Pentland held corporate in-house legal positions after working in corporate private practice in the United Kingdom. She is a member of several legal forums and organizations, including the Association of General Counsels, ChiefLegal Ofcers Roundtable and Global Leaders in Law, and also serves as Vice Chair of the International Bar Association, Corporate Counsel Forum. Ms. Pentland holds an LL.B (honors) lawdegree and is a qualied and active solicitor in England and Wales, inaddition to being a licensed attorney and an active memberof the New York Bar. Peter Y. Solmssen Peter Y. Solmssen has served as a Member of the Managing Board and General Counsel of Siemens AG since 2007. Prior thereto he was Executive Vice President and General Counsel of GE Healthcare. Mr. Solmssen studied at Harvard University and theUniversity of Pennsylvania. Changes during 2012 During the year, there were three outgoing Board Members: Siegfried Russwurm (replaced by Barbara Kux in March 2012); Niklas Savander (replaced by Juha krs in June 2012); and RiikkaTieaho (replaced by Louise Pentland in August 2012). Board meetings During the year under review, the Board met on 12 occasions with all directors eligible to attend doing so either in person or by proxy.
56
Directors responsibilities The Board of Directors is accountable to Nokia Siemens Networks shareholders (currently Nokia and Siemens), and is responsible for the overall direction and supervision of the Group. Each of the ultimate shareholders are listed on various stock exchanges, including the New York Stock Exchange. The Companys aim is to comply in all material respects with all rules andregulations directly applicable to it, as well as to meet all requirements to the extent applicable to the Company, including (but not limited to) those deriving from the rules and regulations related to the various stock exchange listings of the ultimate shareholders. The operations of Nokia Siemens Networks are managed under the direction of the Board within the framework set by Book 2 Dutch Civil Code and the Articles of Association of the Company as well as the Shareholders Agreement, dated April 3, 2007, by and between Nokia, Siemens, and Nokia Siemens Networks B.V. (Shareholders Agreement). Code of Conduct; Compliance Ofce; Internal Audit, including internal investigations The Board will oversee that the Group has proper moral and ethical values. The Board will approve a Code of Conduct for the Group and oversee that the management implements such a code. The Group has a Compliance Ofce headed by the Chief Compliance Ofcer. The Chief Compliance Ofcer will give a quarterly report to the Board on any actual matters, and an annual report on organization, responsibilities and stafng of the Compliance Ofce. The Group has an Internal Audit function, the head of which reports to the Board and to the head of the Internal Audit function of Nokia. The Board shall receive a report on internal audit activities and pending internal investigations from the head of the Internal Audit Function at least once in a quarter. The Board will annually review theorganization, responsibilities and stafng of the Internal AuditFunction. Director compensation It is the Groups policy that other than the Chairman, the directors will not receive any separate compensation for the services they provide as members of the Board of Directors.
Senior management team Our operative management body is the senior management team known as the Executive Board of Nokia Siemens Networks B.V. The following table sets forth the names, ages and positions of members of our senior management team. Membership of the senior management team
Name Age Title
Rajeev Suri Samih Elhage Deepti Arora Kathrin Buvac Hans-Jrgen Bill Ashish Chowdhary
45 51 53 32 52 47
Chief Executive Ofcer Chief Financial Ofcer Vice President Quality Vice President Corporate Strategy and CEO Ofce Executive Vice President Human Resources Executive Vice President/ President Asia, Middle East and Africa Executive Vice President Marketing, Communications and Corporate Affairs Chief Restructuring Ofcer Executive Vice President Technology and Innovation Executive Vice President Mobile Broadband Executive Vice President/ President Europe and Latin America
Barry French
49
Alexander Matuschka Hossein Moiin Marc Rouanne Rene Svendsen-Tune
42 49 49 57
How the senior management team operates The senior management team is chaired by the Chief Executive Ofcer, and meets on a monthly basis. Responsibilities of the senior management team The senior management team reports to the Chief Executive Ofcer, who leads allmatters relating to corporate governance, including audit and compensation matters. It drives Nokia Siemens Networks strategic agenda and decides on cross-company matters such as governance, the Groups annual plan, large-scale capex approvals, acquisitions and divestitures, large-scale credits and risks, people matters, and executive appointments. These are areas where Nokia Siemens Networks benets from the diverse views and deliberation of all of the senior management team.
Annual Report 2012
57
The Chief Executive Ofcer chairs four primary decision making bodies: 1. The senior management team itself, known as the Executive Board, which drives Nokia Siemens Networks strategic agenda, sets long-term targets and makes company-wide policy decisions. The Executive Board is also responsible for monitoring market developments, fostering innovation, overseeing quality improvements, developing talent, shaping our values and culture,and change management. 2. The Executive Management Team sets Nokia Siemens Networks three-year nancial plan and annual budget, manages nancial performance, and makes day-to-day operational decisions as wellas decisions relating to investments and product portfolio. TheExecutive Management Team also focuses on near-term performance management and forecasts, enforcement of policies and targets, and regional and business unit plans, goals and strategies. The Executive Management Team was established intherst quarter of 2013 and assumes the responsibilities and decision-making scope of the former group of executive ofcers comprised of the Chief Executive Ofcer, the Chief Financial Ofcerand the Chief Operating Ofcer. 3. The Business Transformation Board is focused on both completing our restructuring as well as the structural changes needed to continue to move Nokia Siemens Networks to becoming a true leader. Areas covered will include Research and Development (R&D) efciency, product competitiveness, sales acceleration, operations optimization, services transformation, nancial backbone and CFO processes, the continuation of our restructuring, and various new interlock processes around procurement, operations business units and CO. 4. The Pricing Committee sets the process and policy for pricing decisions, and leads the commercial decision-making for major deals. This committee ensures appropriate transparency and scrutiny of key nancial metrics, including protability, project assets,and cash ow. The Chief Financial Ofcer chairs the Monthly Business Reviews, ourprimary vehicle for tracking unit-level performance against our strategy and annual plan.
Management compensation The remuneration of the Nokia Siemens Networks senior management team and the Chairman of the Board of Directors was as follows:
EURm 2012 2011 2010
Short-term employee benets Post-employment benets Other long-term benets Termination benets Share-based payment (income)/expense Total
20.5 1.0 1.3 4.0 26.8
9.4 0.7 5.2 0.6 (0.1) 15.8
7.6 0.5 4.8 (0.1) 12.8
The number of senior management team members ranged from 13 to 15 members during the year (13 to 14 members in 2011 and 12 to 14 members in 2010). The amounts presented above include remuneration to the Executive Board members only for the time they were on theseniormanagement team. In addition to the senior management team members, the remuneration to the Chairman of the Board of Directors is includedinthe amounts presented above, since October 2011. There were no loans granted to the members of the senior management team at December 31, 2012. Employees The Board of Nokia Siemens Networks recognizes that its employees are key to its success and is committed to creating a working environment where everyone has the opportunity to learn, develop and contribute to the success of the business, working within a common set of values. At December 31, 2012, we had 58 411 employees (73686 employees in 2011 and 66 160 employees in 2010), with the decrease in headcount primarily due to our restructuring activities.
16 + 17
A short biography for each of the members of our senior management team can be found on pages 16 and 17.
58
The number of personnel at December 31, 2012, divided according to geographical location is as follows:
2012
North East Europe 1 West Europe 2 South East Europe Africa Europe & Africa Middle East Greater China Japan India APAC Asia & Middle East North America Latin America Americas Total
1 2
8 354 10 190 4 615 1 478 24 637 1 737 8 224 689 10 192 2 773 23 615 3 045 7 114 10 159 58 411
Our Code of Conduct denes the boundaries between appropriate and inappropriate business behavior. According to the Code of Conduct, our employees must not engage in activities that may lead to conicts of interest, such as any agreement or understanding regarding gifts, hospitality, favors, benets, or bribes, in exchange forgaining or maintaining business. The Code of Conduct is supported by the Groups anti-corruption compliance program, which includes among other things, a detailed handbook, training, and several reporting/ helplines available for employees and external workers. Each year there is a mandatory ethical business training program for our employees focused on compliance issues. In 2012, 89.7% of our employees completed thetraining. Government regulation Our business is subject to direct and indirect regulation in each of the countries in which we, the companies with which we work and our customers do business. As a result, changes in or uncertainties related to various types of regulations applicable to current or new technologies, products and services could affect our business adversely. Moreover, the implementation of technological or legalrequirements could impact our products and services, manufacturing and distribution processes, and could affect thetiming of product and services introductions, the cost of our production, products and services, as well as their commercial success. Also, our business is subject to the impacts of changes in trade policies or regulation favoring the local industry participants, as well as other measures with potentially protectionist objectives that the host governments in different countries may take. Export control, tariffs or other fees or levies imposed on our products and services as well as environmental, product safety and security and other regulations that adversely affect the export, import, pricing or costs of our products and services could adversely affect our net sales and results of operations. For example, in the USA, our products and services are subject toawide range of government regulations that might have a direct impact on our business, including, but not limited to, regulation related to product certication, standards, spectrum management, consumer privacy, competition and sustainability. In the European Union the EU level or local member state regulation has in many areas a direct impact on our business and customers. The European regulation inuences for example conditions for innovation for multifunctional devices and services, as well as investment in xed and wireless broadband communication infrastructure. In China newpartly local 3G telecom standards have been enacted that may affect production processes and have impact on our business. Additionally, with respect to certain developing market countries forexample in Asia and in Latin and South America the business environment we operate in can pose risks to our business due tounpredictable, discriminatory or protectionist regulation.
NE including Finland. WE including Germany.
Compliance program We have adopted compliance programs that foster a culture with high ethical and integrity standards. We are committed to actively combating improper business practices, including corruption, and believe that as a multinational company we can play an important role in this area. We also believe that our efforts in this area can provide us with a competitive advantage with customers who demand high ethical standards in their supply chain. We address improper business practices using a four-step strategy: Prevention: raise awareness through clear policies and training ofemployees; Detection: encourage people (internally and externally) to report any concerns or suspected cases of improper conduct by providing clear reporting channels and an anonymous whistleblowing mechanism, and develop tools to identify potential issues, for example by detecting anomalies in expense claims; Correction: investigate all reported concerns and take appropriate action when cases of corruption are conrmed, for example, through training or clarication of policies, disciplinary actions and if necessary dismissal; and Interaction: collaborate with others in the industry, including competitors, customers and suppliers, to promote adoption ofhigh ethical standards industry-wide.
Annual Report 2012
59
We are in continuous dialogue with relevant state agencies, regulators and other decision makers through our experts, industry associations and our representatives in Washington, D.C., Brussels, Espoo, Berlin, Beijing, Delhi and Moscow and through our experts, industry associations and representatives in the regions of Middle East and Africa, Latin and South America and South-East Asia. Policy on suppliers We require a wide range of different components for production and have more than 4,000 suppliers. We generally prefer to have multiple sources for our components, but in certain cases we source some components from a single or small number of suppliers. We source components from a single or multiple suppliers depending on the availability of the component, purchasing price, and terms and conditions. Our business relationships with single suppliers typically involve a high degree of cooperation in R&D, product design, and manufacturing to ensure optimal product interoperability. We limit supply risk in relation to components for which we have a single or small number of suppliers by maintaining appropriate inventory levels. Our collaboration with suppliers has also proven effective incritical situations like the component shortages following the Japanese earthquake in 2011. In 2012, as part of our working capital initiative in connection with our restructuring program, we ramped up the inbound supply hubs to reduce factory inventories and increase inbound supplier delivery performance for our factories. Component supply and demand planning We have in place a demand and supply planning process that matches customer product demand and component supply plans.We share volume forecasts with the relevant suppliers andsubsequently issue purchase orders to procure required components. Depending on the specic arrangement for individual suppliers and the respective lead times for the components they aresupplying, forecasts may be used for purchasing components. Notwithstanding, we have a policy not to issue volume or other purchasing commitments to suppliers other than regular purchaseorders. Health, safety and the environment Details of our approach to health and safety, and environment issues, appear within the Corporate responsibility report on pages48 to 49. Auditor fees and services The independent auditor is elected annually by our shareholders at the Annual General Meeting. Audit fees are presented on page 125.
Dividend policy and the Annual General Meeting The Annual General Meeting of Nokia Siemens Networks B.V. shall take place by June 30, 2013. Subject to applicable mandatory provisions of the laws in the Netherlands and approval at the Annual General Meeting, the parent companies have agreed a general dividend policy of an annual cash dividend at least equal to 50% ofthe Groups consolidated net income for the nancial years endingafter December 31, 2008. This general policy may be deviated fromin any year upon the joint decision of the parent companies. TheBoard of Directors proposes no dividend and nodistribution ofthe cumulative reserves for the year ending December 31, 2012. Jesper Ovesen Chairman
Forward-looking statements This report includes forward-looking statements. The words should, could, continue, expect, target, estimate, may, plans, will, believe, anticipate, intend, predict, assume, positioned, shall, risk and other similar expressions that are predictions or indications of future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are nothistorical facts, in particular but not limited to the statements in, A letter from our Chairman, Chief Executive Ofcers strategic review, Our strategy and transformation, Industry trends, theOperating and Financial Review and Risk factors, are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company, and such statements may constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Group, orindustry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among other things, general economic and business conditions, the competitive environment, the ability to employ competent personnel, market development relating to the sector and other risks described in Risk factors. The forward-looking statements are not guarantees of the future operational or nancial performance of the Group.
60
Financial statements
Consolidated Financial Statements 2012 62 Consolidated Income Statement 63 Consolidated Statement ofComprehensive Income 64 Consolidated Statement ofFinancialPosition 65 Consolidated Statement ofCash Flows 66 Consolidated Statement ofChanges in Shareholders Equity 67 Notes to the Consolidated Financial Statements Company Financial Statements 2012 118 Company Statement ofFinancial Position 119 Company Income Statement 120 Notes to the Company Financial Statements Other Information 127 Proposed prot appropriation 127 Proposed appropriation ofresult 127 Subsequent events 128 Independent auditors report 129 Glossary
Consolidated Financial Statements
Consolidated Income Statement
2012 Before specic items EURm Specic items EURm Before specic items EURm
2011 Specic items EURm Before specic items EURm
2010 Specic items EURm
For the year ended December 31
Notes
Total EURm
Total EURm
Total EURm
Net sales Cost of sales
3, 4 5, 10, 18
13 372 (9 264) 4 108 (1 908) (885) (453) 105 (145) 822
(653) (653) (208) (382) (242) (78) (1 563)
13 372 (9 917) 3 455 (2 116) (1 267) (695) 105 (223) (741) 8 15 (123) (199) (1 040) (342) (1 382)
13 645 (9 886) 3 759 (1 969) (990) (497) 92 (60) 335
(51) (51) (107) (330) (37) (19) (544)
13 645 (9 937) 3 708 (2 076) (1 320) (534) 92 (79) (209) (17) 15 (108) (58) (377) (234) (611)
12 206 (8 767) 3 439 (1 804) (992) (459) 97 (115) 166
(174) (174) (212) (307) (76) (27) (796)
12 206 (8 941) 3 265 (2 016) (1 299) (535) 97 (142) (630) 11 14 (157) (105) (867) (164) (1 031)
Gross prot Research and development expenses 5, 10 Selling and marketing expenses 5, 10 Administrative and general expenses 5, 10 Other income 7 Other expenses 7, 9, 20, 31 Operating prot/(loss) Share of results of associates Financial income Financial expenses Other nancial results Loss before tax Income tax expense Loss for the year from continuing operations Discontinued operations Loss for the year from discontinued operations Loss for the year Attributable to: Equity holders of the parent Non-controlling interests 15, 33 11 11 11 12
31
(63) (1 445) (1 463) 18 (1 445)
(87) (698) (710) 12 (698)
(58) (1 089) (1 090) 1 (1 089)
For an analysis of specic items, refer to Note 2, Specic items. The notes are an integral part of these consolidated nancial statements.
62
Consolidated Statement of Comprehensive Income
Notes
2012 EURm
2011 EURm
2010 EURm
Loss for the year Other comprehensive income Items that may be reclassied subsequently to prot or loss Translation differences Cash ow hedges Available-for-sale investments Share of other comprehensive income of associates Other increase Income tax related to components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive loss for the year Attributable to: Equity holders of the parent Non-controlling interests Total comprehensive loss for the year Total comprehensive loss attributable to equity shareholders arises from: Continuing operations Discontinued operations
(1 445)
(698)
(1 089)
21 22 22 15, 21 21, 22
(6) 94 4 92 (1 353) (1 372) 19 (1 353) (1 309) (63) (1 372)
47 17 (1) (2) 1 3 65 (633) (652) 19 (633) (565) (87) (652)
88 (99) 2 17 8 (1 081) (1 097) 16 (1 081) (1 039) (58) (1 097)
The notes are an integral part of these consolidated nancial statements.
Annual Report 2012
63
Consolidated Statement of Financial Position
December 31
Notes
2012 EURm
2011 EURm
ASSETS Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates and other companies Deferred tax assets Long-term loans receivable Available-for-sale investments Current assets Inventories Accounts receivable, net of allowances for doubtful accounts Prepaid expenses and accrued income Current portion of long-term loans receivable Other nancial assets Available-for-sale investments, liquid assets Cash and cash equivalents Assets of disposal groups classied as held for sale Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital Share premium Translation differences Fair value and other reserves Accumulated decit Non-controlling interests Total equity Non-current liabilities Long-term interest-bearing liabilities Deferred tax liabilities Provisions Other long-term liabilities Current liabilities Current portion of long-term interest-bearing liabilities Short-term borrowings Other nancial liabilities Accounts payable Accrued expenses Provisions Liabilities of disposal groups classied as held for sale Total liabilities Total equity and liabilities
8, 9, 13 13 14 15 26 16, 34 16
182 387 509 31 470 63 29 1 671
173 699 641 28 587 85 23 2 236 1 275 5 215 1 051 54 61 13 1 613 9 282 57 11 575
18 16, 20, 32, 34 19 16, 34 16, 17, 34 16, 34 16, 34 31
984 4 111 879 37 165 2 2 418 8 596 143 10 410
23 23 21 22
0 9 744 133 75 (7 626) 2 326 126 2 452
0 9 744 136 (19) (6 163) 3 698 116 3 814 366 32 106 125 629 357 888 97 2 209 2 985 435 6 971 161 7 761 11 575
16, 24, 34 26 28 6
821 29 303 118 1 271
16, 24, 32, 34 16, 24, 32, 34 16, 17, 34 16, 32, 34 25, 27 28 31
195 124 26 2 352 3 184 716 6 597 90 7 958 10 410
64
Consolidated Statement of Cash Flows
Notes
2012 EURm
2011 EURm
2010 EURm
Cash ows from operating activities Loss for the year Adjusted for: Restructuring and other specic items (Note 2)1 Depreciation and amortization (Note 10) Income taxes (Notes 12 & 31) Financial income and expenses (Note 11) Transfer from hedging reserve to sales and cost of sales (Note 22) Prot/(Loss) on sale of property, plant and equipment, businesses and Group companies Other adjustments Change in net working capital: Decrease in current receivables Decrease/(increase) in inventories Increase/(decrease) in interest-free liabilities2 Cash from operations Interest received Interest paid Other nancial income and expenses, net (paid)/received Income taxes paid Net cash from operating activities Cash ows from investing activities Acquisition of Group companies, net of acquired cash Purchase of shares in associates Proceeds from current available-for-sale investments, liquid assets Purchase of non-current available-for-sale investments Proceeds from short-term and other long-term loans receivable Purchases of property, plant and equipment, and intangible assets Payments for disposal of businesses (Note 8) and Group companies Proceeds from sale of property, plant and equipment, and intangible assets Net cash used in investing activities Cash ows from nancing activities Proceeds from issuance of cumulative preferred shares Proceeds from long-term interest-bearing liabilities Repayment of long-term interest-bearing liabilities (Repayments of)/proceeds from short-term borrowings Dividends paid to non-controlling interests Net cash (used in)/from nancing activities Foreign exchange adjustments Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents comprise: Bank and cash Current available-for-sale investments, cash equivalents
(1 445) 33 1 162 587 347 307 64 51 87 1 160 776 198 11 2 145 11 (134) (136) (258) 1 628 64 10 (216) (125) 6 (261) 23 24, 34 1 (264) (244) (13) (520) (42) 805 1 613 2 418 1 712 706 2 418
(698) 57 711 239 151 28 (10) 86 564 528 (44) (468) 580 9 (104) 30 (191) 324 (781) 2 (9) 82 (303) (4) 24 (989) 1 000 (48) 232 (29) 1 155 (75) 415 1 198 1 613 729 884 1 613
(1 089) 140 843 170 248 31 18 44 405 852 (209) (415) 633 5 (102) (329) (204) 3 (5) (4) 22 (6) 46 (306) (21) 30 (244) 15 414 (5) 229 (12) 641 38 438 760 1 198 757 441 1 198
33
33
16, 34
Excludes PPA related charges, divestment results and impairments which are presented in other line items in the above adjustments section or in Note 33, Notes to the consolidated statement of cash ows. 2 Includes changes in the following line items in the statement of nancial position: accounts payable, accrued expenses, provisions and other short-term liabilities.
1
In 2010, EUR 1 500 million loans and capitalized interest of EUR 32 million from the Groups parent companies were converted into preferred shares in Nokia Siemens Networks B.V. This is the only material non-cash transaction in all three periods presented. The gures in the consolidated statement of cash ows cannot be directly traced from the statement of nancial position without additional information as a result ofacquisitions and disposals of subsidiaries and net foreign exchange differences arising on consolidation. The notes are an integral part of these consolidated nancial statements. Annual Report 2012 65
Consolidated Statement of Changes in Shareholders Equity
Attributable to owners of the parent Number of ordinary shares Fair value Before Number of and AccunonNoncumulative Ordinary Share Translation other mulated controlling controlling preference share decit interests interests shares capital1 premium differences reserves
EURm
Notes
Total
Balance at January 1, 2010 (Loss)/prot Other comprehensive income Cash ow hedges, net of tax Currency translation differences, net of tax Other increase, net of tax Total comprehensive income/ (expense) for the year Cumulative preference shares issued Dividend Additional parent contribution Changes in ownership interests in subsidiaries Balance at December 31, 2010 (Loss)/prot Other comprehensive income Cash ow hedges, net of tax 22 Available-for-sale investments, net of tax 22 Currency translation differences, netoftax 21 Share of other comprehensive income of associates 15, 21 Other increase, net of tax Total comprehensive income/ (expense) for the year Cumulative preference shares issued Dividend Acquisitions and other changes in non-controlling interests Balance at December 31, 2011 (Loss)/prot Other comprehensive income Cash ow hedges, net of tax 22 Available-for-sale investments, net of tax 22 Currency translation differences, netoftax 21 Share of other comprehensive income of associates 15, 21 Other decrease, net of tax Total comprehensive (expense)/ income for the year Dividend Balance at December 31, 2012
1
100 073
7 194
22
47
(4 288) (1 090)
2 975 (1 090) (85)
119 3 094 1 (1 089) (85) 15 91 2
22 21 76
(85) 2 76 (85) (1 088)
76 2 (1 097) 1 532 15 (75) 3 350 (710) 20 (1) 40
23
300
1 532 15 3 (78) 98 (38) (5 454) (710) 20 (1) 40 (2) 1 38 19 (709)
16 (1 081) 1 532 (32) (32) 15 (8) 12 (83) (698) 20 (1) 7 47 (2) 1 (633) 1 000 (15) (15) 17 17 19
100 073
300
8 744
95 3 445
(2) 1 (652) 1 000
23 8 100 073
200
1 000
500
9 744
136
(19) (6 163) (1 463) 94
3 698 (1 463) 94 (7)
116 3 814 18 (1 445) 94 1 (6) 4 19 (1 353) (9) (9) 126 2 452
(7) 4 (3) 100 073 500 0 9 744 133 94 75 (1 463) (7 626)
4 (1 372) 2 326
Ordinary share capital comprises EUR 400 thousand of ordinary shares of the Group.
66
1 Accounting principles
General Nokia Siemens Networks B.V., a limited liability company incorporated and domiciled in The Hague, the Netherlands, is the holding company for all its subsidiaries (Nokia Siemens Networks or the Group). The Groups operational headquarters are in Espoo, Finland. The Group is a leading global provider of telecommunications infrastructure, with a focus on the mobile broadband market. Basis of presentation The consolidated nancial statements of Nokia Siemens Networks are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and in conformity with IFRS as adopted by the European Union (IFRS). The consolidated nancial statements are presented in millions of euro (EURm), except as otherwise noted, and are prepared under the historical cost convention, except as disclosed in the accounting policies below. The Group commenced operations on April 1, 2007 upon the contribution of certain tangible and intangible assets and certain business interests that comprised Nokia Corporations (Nokia) networks business and Siemens Aktiengesellschaft (Siemens) carrier-related operations. Nokia and Siemens (the parent companies) each own approximately 50% of Nokia Siemens Networks. Nokia is incorporated in Espoo, Finland and Siemens is incorporated in Munich, Germany. Nokia has the ability to appoint the Chief Executive Ofcer (CEO) of the Group and the majority of the members of the Board of Directors. Accordingly, for accounting purposes, Nokia is deemed to have control and thus consolidates the results of Nokia Siemens Networks in its nancial statements. Siemens accounts for its ownership using the equity method of accounting. On March 17, 2013 the Board of Directors of Nokia Siemens Networks B.V. authorized the nancial statements for issuance. This paragraph is included in connection with statutory reporting requirements in the Netherlands. The company income statement of the Parent company is prepared in compliance with section 2:402 of the Netherlands Civil Code. This paragraph is included in connection with statutory reporting requirements in Germany. The fully consolidated German subsidiaries, Nokia Siemens Networks GmbH & Co. KG, registered in the commercial register of Munich under HRA 88537 and Nokia Siemens Networks Services GmbH & Co. KG, registered in the commercial register of Munich under HRA 90646 have made use of the exemption available under 264b of the German Commercial Code (HGB).
Adoption of pronouncements under IFRS In the current year, the Group has adopted the following new and revised standards, and amendments and interpretations to existing standards issued by the IASB that are relevant to its operations andeffective for accounting periods commencing on or after January 1, 2012: Amendments to IAS 1, Presentation of Financial Statements, retains the one or two statement approach at the option of the entity and only revises the way other comprehensive income is presented; separate subtotals are required for those elements which may be recycled and those elements that will not be recycled. Amendments to IAS 12, Income Taxes, provides clarication for themeasurement of deferred taxes in situations where an asset ismeasured using the fair value model in IAS 40, Investment Property, by introducing a presumption that the carrying amount ofthe underlying asset will be recovered through sale. In addition, a number of other amendments that form part of the IASBs annual improvement project were adopted by the Group. Theadoption of each of the above amendments did not have a material impact on the consolidated nancial statements. Principles of consolidation The consolidated nancial statements include the accounts of Nokia Siemens Networks B.V. as the parent company (the Parent), and each of those companies over which the Group exercises control. Control over an entity exists when the Group owns, directly or indirectly through subsidiaries, more than 50% of the voting rights of the entity, the Group has the power to govern the operating and nancial policies of the entity through agreement or the Group has the power to appoint or remove the majority of the members of the board of directors of the entity. The Groups share of prots and losses of associates is included in the consolidated comprehensive income statement in accordance with the equity method of accounting. After the carrying amount of the investors interest is reduced to nil, losses continue to be recognized, when it is considered that a constructive obligation exists. An associate is an entity over which the Group exercises signicant inuence. Signicant inuence exists when the Group owns, directly or indirectly through subsidiaries, more than 20% ofthe voting rights of the company. If the Group owns, directly or indirectly through subsidiaries, less than 20% of the voting rights of the company, it is presumed that the Group does not have signicant inuence, unless such inuence can be clearly demonstrated. All intercompany transactions are eliminated as part of the consolidation process. Non-controlling interests are presented separately as a component of net prot and are shown as a component of shareholders equity in the consolidated statement ofnancial position. The entities or businesses acquired during the nancial periods presented have been consolidated from the date on which control ofthe net assets and operations was transferred to the Group. Similarly, the results of Group entities or businesses divested during an accounting period are included in the Group consolidated nancial statements only to the date of disposal.
Annual Report 2012
67
Business combinations The acquisition method of accounting is used to account for acquisitions of separate entities or businesses by the Group. The consideration transferred in a business combination is measured as the aggregate of the fair values of the assets transferred, liabilities incurred towards the former owners of the acquired business and equity instruments issued. Acquisition-related costs are recognized as expenses in the income statement in the period in which the costs are incurred and the related services are received. Identiable assets acquired and liabilities assumed by the Group are measured separately at their fair value at the acquisition date. Non-controlling interests in the acquired business are measured separately at fair value or at the non-controlling interests proportionate share of the identiable net assets of the acquired business. The excess of the aggregate consideration transferred over the acquisition date fair values of the identiable net assets acquired is recorded as goodwill. Non-current assets and disposal groups held for sale Non-current assets and disposal groups are classied as held for sale when the carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use. These assets, or in the case of disposal groups, assets and liabilities, are presented separately in the consolidated statement of nancial position and measured at the lower of the carrying amount and fair value less costs to sell. Non-current assets classied as held for sale, or included in a disposal group that is classied as held for sale, are not depreciated. Assessment of the recoverability of long-lived assets, intangible assets and goodwill For purposes of impairment testing, goodwill has been allocated to each of the cash-generating units or groups of cash-generating units (CGUs), expected to benet from the synergies of the combination. The Group assesses the carrying value of goodwill annually or more frequently if events or changes in circumstances indicate that such carrying value may not be recoverable. The carrying value of identiable intangible assets and long-lived assets is assessed if events or changes in circumstances indicate that such carrying value may not be recoverable. Factors that trigger an impairment review include, but are not limited to, underperformance relative to historical or projected future results, signicant changes in the manner of the use of the acquired assets or the strategy for the overall business and signicant negative industry or economic trends. The Group conducts its impairment testing by determining the recoverable amount for the asset or cash-generating unit. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value-in-use. The recoverable amount is then compared to the assets carrying amount and an impairment loss is recognized if the recoverable amount is less than the carrying amount. Impairment losses are recognized immediately in the income statement.
Disposals of separate entities or businesses If upon disposal, the Group loses control of a separate entity or business, it records a gain or loss on disposal at the date when control is lost. The gain or loss on disposal is calculated as the difference between the fair value of the consideration received and the carrying amounts of derecognized assets (including any goodwill) and liabilities of the disposed entity or business, and the carrying amount of any non-controlling interest in the entity, adjusted by amounts recognized in other comprehensive income in relation to that entity or business. Segment information Operating segments have been determined by reference to the internal reporting information provided to the chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments. In 2012, the chief operating decision-maker was a group of executive ofcers comprising the Chief Executive Ofcer, the Chief Financial Ofcer and the Chief Operating Ofcer. Foreign currency translation Functional and presentation currency The nancial statements of the majority of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated nancial statements are presented in euro, which is the functional and presentation currency of the Parent. Transactions in foreign currencies Transactions in foreign currencies are recorded at the rates of exchange prevailing at the dates of the individual transactions. For practical reasons, a rate that approximates the actual rate at the date of the transaction is often used. At the end of an accounting period, the unsettled balances on foreign currency monetary assets and liabilities are valued at the rates of exchange prevailing at the end of the accounting period. Foreign exchange gains and losses arising from statement of nancial position items and the fair value changes in the related hedging instruments are reported in nancial income and expenses. For non-current available-for-sale investments, such as shares, the unrealized foreign exchange gains and losses are recognized in other comprehensive income. Foreign group companies In the consolidated nancial statements, all income and expenses offoreign group companies, where the functional currency is other than euro, are translated into euro at the average foreign exchange rates for the accounting period. All assets and liabilities of foreign group companies are translated into euro at the foreign exchange rates at the end of the accounting period. Differences resulting from the translation of income and expenses at the average rate and assets and liabilities at the closing rate are recognized as translation differences in other comprehensive income. On the disposal of all orpart of a foreign group company by sale, liquidation, repayment ofshare capital or abandonment, the cumulative amount or proportionate share of the translation difference is recognized as income or expense in the same period in which the gain or loss on disposal is recognized.
68
Foreign group companies in hyperinationary economies The nancial statements of foreign group companies, where the functional currency is the currency of a hyperinationary economy, are adjusted to reect changes in general purchasing power. In such instances, non-monetary items in the statement of nancial position and all items in the income statement should be expressed in terms of the measuring unit current at the end of the accounting period. These items are restated through the application of a general price index. The comparatives, which were presented as current year amounts in the prior-year nancial statements in a stable currency (i.e. not a currency of a hyperinationary economy), are not restated. After the nancial statements have been restated in the current purchasing power, all amounts for the current period are then translated into the stable currency at the closing rate for inclusion in the consolidated nancial statements. Inationary gains and losses on the net monetary position are recognized as gains and losses in the income statement. Revenue recognition The majority of the Groups sales are recognized when the signicant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that the economic benets associated with the transaction will ow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably. The Group accounts for special pricing agreements and other volume-based discounts as a reduction inrevenue. Service revenue, which typically includes managed services and maintenance services, is generally recognized on a straight-line basis over the specied period unless there is evidence that some other method better represents the rendering of services. The Group enters into transactions involving multiple components consisting of any combination of hardware, services and software. The commercial effect of each separately identiable component of the transaction is evaluated in order to reect the substance of the transaction. Revenue is allocated to each component based on its relative fair value. The Group determines the fair value of each component by taking into consideration factors such as the price when the component, or a similar component is sold separately by the Group or a third party. The revenue allocated to each component is recognized when the revenue recognition criteria for that component have been met. In addition, sales from contracts involving solutions achieved through the modication of complex telecommunications equipment are recognized using the percentage of completion method when the outcome of the contract can be estimated reliably. A contracts outcome can be estimated reliably when total contract revenue and the costs to complete the contract can be estimated reliably, it is probable that the economic benets associated with the contract will ow to the Group and the stage of contract completion can be measured reliably. When the Group is not able to meet one or more of those conditions, the policy is to recognize revenue only equal to costs incurred to date, to the extent that such costs are expected to be recovered.
Progress towards completion is measured by reference to cost incurred to date as a percentage of estimated total project costs, using the cost-to-cost method. The percentage of completion method relies on estimates of total expected contract revenue and costs, as well as dependable measurement of the progress made towards completing a particular project. Recognized revenues and prots are subject to revisions during the project in the event that the assumptions regarding the overall project outcome are revised. Thecumulative impact of a revision in estimates is recorded in the period such revisions become probable and can be estimated reliably. Losses on projects in progress are recognized in the period they become probable and can be estimated reliably. Shipping and handling costs The costs of shipping and distributing products are included in cost of sales. Research and development Research and development costs are expensed as incurred, except for certain development costs, which are capitalized when it is probable that a development project will generate future economic benets and certain criteria, including commercial and technological feasibility, have been met. Capitalized development costs, comprising direct labor and related overhead, are amortized on a systematic basis over their expected useful lives of between two and ve years. Capitalized development costs are subject to regular assessments of recoverability based on anticipated future revenues, including the impact of changes in technology. Unamortized capitalized development costs determined to be in excess of their recoverable amounts are expensed immediately. Other intangible assets Acquired patents, trademarks, licenses, software licenses for internal use, customer relationships and developed technology are capitalized and amortized using the straight-line method over their useful lives, generally three to seven years. Where an indication of impairment exists, the carrying amount of the related intangible asset is assessed for recoverability. Any resulting impairment losses are recognized immediately in the income statement. Employee benets Pensions The Group companies have various pension schemes in accordance with the local conditions and practices in the countries in which they operate. The schemes are generally funded through payments to insurance companies or to trustee-administered funds as determined by periodic actuarial calculations. In a dened contribution plan, the Groups legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. The Groups contributions to dened contribution plans are recognized in the income statement in the period to which the contributions relate. All arrangements that do not fulll these conditions are considered dened benet plans.
Annual Report 2012
69
For dened benet plans, pension costs are assessed using the projected unit credit method: the pension cost is recognized in the income statement so as to spread the service cost over the service lives of employees. The pension obligation is measured as the present value of the estimated future cash outows using interest rates on high quality corporate bonds or government bonds with appropriate maturities. Actuarial gains and losses outside the corridor are recognized over the average remaining service lives of employees. The corridor is dened as 10% of the greater of the value of plan assets and dened benet obligation at the beginning of the respective year. Past service costs are recognized immediately in the income statement, unless the changes to the pension plan are conditional on the employees remaining in service for a specied period of time (the vesting period). In this case, the past service costs are amortized on a straight-line basis over the vesting period. The liability (or asset) recognized in the statement of nancial position is the pension obligation at the closing date less the fair value of plan assets, the share of unrecognized actuarial gains and losses and past service costs. Any net pension asset is limited to unrecognized actuarial losses, past service cost, the present value of available refunds from the plan and expected reductions in future contributions to the plan. Actuarial valuations for the Groups dened benet pension plans are performed annually. In addition, actuarial valuations are performed when a material curtailment or settlement of a dened benet plan occurs in the Group. Termination benets Termination benets are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benets. The Group recognizes termination benets when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benets as a result of an offer made to encourage voluntary redundancy. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the expected useful lives of the assets as follows: Buildings and constructions Industrial and ofce buildings Light buildings and constructions Machinery and equipment Production machinery, measuring and test equipment Other machinery and equipment Land and water areas are not depreciated.
Maintenance, repairs and renewals are generally expensed in the period in which they are incurred. However, major renovations are capitalized and included in the carrying amount of the asset when it is probable that future economic benets in excess of the originally assessed standard of performance of the existing asset will ow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. Leasehold improvements are depreciated over the shorter of the lease term or useful life. Gains and losses on the disposal of property, plant and equipment are included in operating prot or loss. Leases Leases are classied as nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classied as operating leases. The Group has entered into various operating lease contracts. The related payments are treated as rental expenses and recognized in the income statement on a straight-line basis over the lease terms unless another systematic approach is more representative of the time pattern of the Groups benet. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using standard cost, which approximates actual cost on a FIFO (rst-in, rst-out) basis. Net realizable value is the amount that can be realized from the sale of the inventory in the normal course of business after allowing for the costs of realization. In addition to the cost of materials and direct labor, an appropriate proportion of production overhead is included in the inventory values. An allowance is recorded for excess inventory and obsolescence based on the lower of cost and net realizable value. Financial assets The Group has classied its nancial assets as one of the following categories: available-for-sale investments, derivative and other current nancial assets, loans receivable, accounts receivable or cash and cash equivalents. Derivatives are described below in the section on Derivative nancial instruments. Derivatives and other current nancial assets are presented in Note 16, Fair value ofnancial instruments. Available-for-sale investments The Group invests a portion of cash needed to cover the projected cash needs of its ongoing operations in highly liquid, interest-bearing investments. The following investments are classied as availablefor-sale based on the purpose for acquiring the investments and the Groups ongoing intentions: (1) Highly liquid, xed income and money-market investments that are readily convertible to known amounts of cash with maturities at acquisition of three months or less, which are included in cash and cash equivalents in the statement of nancial position. Due to the high credit quality and short-term nature of these investments there is an insignicant risk of changes in value. (2) Similar types of investments as in category (1), but with maturities at acquisition of longer than three months, classied in the statement of nancial position as current availablefor-sale investments, liquid assets. (3)Investments in technology related publicly quoted equity shares,or unlisted private equity shares and unlisted funds, are classied in the statement of nancial position as non-current available-for-sale investments.
20 33 years 3 20 years
1 5 years 3 10 years
70
Current xed income and money-market investments are fair valued by using quoted market rates, discounted cash ow analyses and other appropriate valuation models at the statement of nancial position date. Investments in publicly quoted equity shares are measured at fair value using exchange quoted bid prices. Other available-for-sale investments carried at fair value include holdings in unlisted shares. Fair value is estimated by using various factors, including, but not limited to: (1) the current market value of similar instruments, (2) prices established from a recent arms length nancing transaction of the target companies, (3) analysis of market prospects and operating performance of the target companies taking into consideration public market comparable companies in similar industry sectors. The remaining available-for-sale investments, which are technology-related investments in private equity shares and unlisted funds for which the fair value cannot be measured reliably due to non-existence of public markets or reliable valuation methods against which to value these assets, are carried at cost less impairment. All purchases and sales of investments are recorded on the trade date, which is the date that the Group commits to purchase or sell the asset. The fair value changes of available-for-sale investments are recognized in fair value and other reserves as part of other comprehensive income, with the exception of interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognized directly in the income statement. Dividends on available-for-sale equity instruments are recognized in the consolidated income statement when the Groups right to receive payment is established. When the investment is disposed of, the related accumulated fair value changes are released from other comprehensive income and recognized in the income statement. The weighted average method is used when determining the cost basis of publicly listed equities being disposed of by the Group. The FIFO method is used to determine the cost basis of xed income securities being disposed of by the Group. An impairment is recorded when the carrying amount of an available-for-sale investment is greater than the estimated fair value and there is objective evidence that the asset is impaired. The cumulative net loss relating to that investment is removed from equity and recognized in the income statement for the period. If, in a subsequent period, the fair value of the investment in a non-equity instrument increases and the increase can be objectively related to an event occurring after the loss was recognized, the loss is reversed, with the amount of the reversal included in the income statement. Loans receivable Loans receivable include loans to customers and are measured initially at fair value and subsequently at amortized cost less impairment using the effective interest method. Loans are subject to regular review as to their collectability and available collateral. In the case that a loan is deemed not fully recoverable, a provision is made, and included in other operating expenses to reect the shortfall between the carrying amount and the present value of the expected cash ows. Interest income on loans receivable is recognized in the income statement in other income or nancial income depending on the nature of the receivable by applying the effective interest rate. The long-term portion of loans receivable is included in the statement of nancial position in long-term loans receivable and the current portion in current portion of long-term loans receivable.
Accounts receivable Accounts receivable include both amounts invoiced to customers and amounts where the Groups revenue recognition criteria have been fullled but the customers have not yet been invoiced. Accounts receivable are carried at amortized cost using the effective interest rate method less allowances for doubtful accounts. Allowances for doubtful accounts are based on a periodic review of all outstanding amounts, including an analysis of historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms. Baddebts are written off when identied as uncollectible and are included in other expenses. The Group derecognizes an accounts receivable balance only when the contractual rights to the cash ows from the asset expire or it transfers the nancial asset and substantially all the risks and rewards of ownership of the asset to another entity. Cash and cash equivalents Bank and cash consist of cash at bank and in hand. Cash equivalents consist of highly liquid available-for-sale investments purchased with remaining maturities at the date of acquisition of three months or less. Financial liabilities Loans payable Loans payable are recognized initially at fair value, net of transaction costs incurred. In subsequent periods, loans are stated at amortized cost using the effective interest method. The long-term portion of loans payable is included in the statement of nancial position in long-term interest-bearing liabilities and the current portion in the current portion of long-term interest-bearing liabilities. Interest costs are recognized in the income statement as nancial expenses in the period in which they are incurred. Accounts payable Accounts payable are carried at the original invoiced amount which is considered to be fair value due to the short-term nature of the Groups accounts payable. Derivative nancial instruments All derivatives are recognized initially at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value. The method of recognizing the resulting gain or loss varies according to whether the derivatives are designated and qualify under hedge accounting. Generally the cash ows of ahedge are classied as cash ows from operating activities in the consolidated statement of cash ows as the underlying hedged items relate to the Groups operating activities. When a derivative contract is accounted for as a hedge of an identiable position relating to nancing or investing activities, the cash ows of the contract are classied in the same manner as the cash ows of the position being hedged.
Annual Report 2012
71
Derivatives not designated in hedge accounting relationships carried at fair value through prot and loss Fair values of cash-settled equity derivatives are calculated based onquoted market rates at each statement of nancial position date. Changes in fair value are recognized in the income statement. Fair values of forward rate agreements, interest rate options, futures contracts and exchange traded options are calculated based on quoted market rates at each statement of nancial position date. Discounted cash ow analyses are used to value interest rate and currency swaps. Changes in the fair value of these contracts are recognized in the income statement. Forward foreign exchange contracts are valued at the market forward exchange rates. Changes in fair value are measured by comparing these rates with the original contract forward rate. Currency options are valued at each statement of nancial position date by using the Garman & Kohlhagen option valuation model. Changes in the fair value of these instruments are recognized in theincome statement. For derivatives not designated under hedge accounting but hedging identiable exposures such as anticipated foreign currency denominated sales and purchases, the gains and losses are recognized in other income or expenses. The gains and losses onallother derivatives not designated under hedge accounting are recognized in nancial income and expenses (refer to Note 11, Financial income and expenses). Embedded derivatives, if any, are identied and monitored by the Group and measured at fair value at each statement of nancial position date with changes in fair value recognized in the income statement. Hedge accounting The Group uses hedge accounting in respect of certain forward foreign exchange contracts and options, or option strategies which have zero net premium or a net premium paid, and where the critical terms of the bought and sold options within a collar or zero premium structure are the same and where the nominal amount of the sold option component is no greater than that of the bought option. Cash ow hedges: Hedging of forecast foreign currency denominated sales and purchases The Group applies hedge accounting for Qualifying hedges. Qualifying hedges are those properly documented cash ow hedges of the foreign exchange rate risk of future forecast foreign currency denominated sales and purchases that meet the requirements set out in IAS 39, Financial Instruments: Recognition and Measurement. The hedged item must be highly probable and must present an exposure to variations in cash ows that could ultimately affect prot or loss. The hedge must be highly effective, both prospectively and retrospectively. For qualifying foreign exchange forwards, the change in fair value that reects the change in spot exchange rates is deferred in fair value and other reserves to the extent that the hedge is effective. For qualifying foreign exchange options or option strategies, the change in intrinsic value is deferred in fair value and other reserves to the extent that the hedge is effective. In all cases the ineffective portion is recognized immediately in the income statement in nancial income and expenses (refer to Note 11, Financial income and expenses). Hedging costs, either expressed as the change in fair value that
reects the change in forward exchange rates less the change in spot exchange rates for forward foreign exchange contracts, or changes in the time value for options, or options strategies are recognized in other income or expenses. Accumulated fair value changes from qualifying hedges are released from fair value and other reserves into the income statement as adjustments to sales and cost of sales in the period when the hedged item affects the income statement. Forecast foreign currency sales and purchases affect prot and loss at various dates up to approximately 15 months from the statement of nancial position. If the forecasted transaction is no longer expected to take place, all deferred gains or losses are released immediately into the income statement as adjustments to sales and cost of sales. If the hedged item ceases to be highly probable but is still expected to take place, accumulated gains and losses remain in equity until the hedged cash ow affects the income statement. Cash ow hedges: Hedging of foreign currency risk of highly probable business acquisitions The Group hedges the cash ow variability due to foreign currency risk inherent in highly probable business acquisitions that result in the recognition of non-nancial assets. When those assets are recognized in the statement of nancial position, the gains and losses previously deferred in fair value and other reserves are transferred from fair value and other reserves and included in the initial acquisition cost of the asset. In order to apply for hedge accounting, the forecasted transactions must be highly probable and the hedges must be highly effective prospectively and retrospectively. Cash ow hedges: Hedging of cash ow variability on variable rate liabilities The Group applies cash ow hedge accounting for hedging cash ow variability on certain variable rate liabilities. The effective portion of the gain or loss relating to interest rate swaps hedging variable rate borrowings is deferred in fair value and other reserves. The gain or loss relating to the ineffective portion is recognized immediately in the income statement in nancial income and expenses (refer to Note 11, Financial income and expenses). For hedging instruments settled before the maturity date of the related liability, hedge accounting will immediately discontinue from that date onwards, with all the cumulative gains and losses on the hedging instruments recycled gradually to the income statement in nancial income and expenses (refer to Note 11, Financial income and expenses) when the hedged variable interest cash ows affect the income statement. Income taxes The tax expense comprises current tax and deferred tax. Current taxes are based on the results of the Group companies and are calculated according to local tax rules. Tax is recognized in the income statement except to the extent that it relates to items recognized in other comprehensive income or directly in equity, thenthe tax is recognized in other comprehensive income or equity, respectively.
Deferred tax assets and liabilities are determined, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated nancial statements. Deferred tax assets are recognized to the extent that it is probable that future taxable prot will be available against which the unused tax losses or deductible temporary differences can be utilized. When circumstances indicate it is no longer probable that deferred tax assets will be utilized, they are assessed for realizability and adjusted as necessary. Deferred tax liabilities are recognized for temporary differences that arise between the fair value and tax base of identiable net assets acquired in business combinations. Deferred tax assets and deferred tax liabilities are offset for presentation purposes when there is a legally enforceable right to set off current tax assets against current tax liabilities, and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which signicant amounts of deferred tax liabilities or assets are expected to be settled or recovered. The enacted or substantively enacted tax rates as of each statement of nancial position date that are expected to apply in the period when the asset is realized or the liability is settled are used in the measurement of deferred tax assets and liabilities. Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. When the Group expects a provision to be reimbursed, the reimbursement is recognized as an asset only when the reimbursement is virtually certain. The Group assesses the adequacy of its existing provisions and adjusts the amounts as necessary based on actual experience and changes in future estimates at each statement of nancial position date. Warranty provisions The Group provides for the estimated liability to repair or replace products under warranty at the time revenue is recognized. The provision is an estimate based on historical experience of the level of repairs and replacements. Tax provisions The Group recognizes a provision for tax contingencies based upon the estimated future settlement amount at each statement of nancial position date. Restructuring provisions The Group provides for the estimated cost to restructure when a detailed formal plan of restructuring has been completed, approved by management and the restructuring plan has been announced. Restructuring costs consist primarily of personnel restructuring charges. The other main components are costs associated with the closure of manufacturing sites and exiting real estate locations, divestment related charges and impairment charges.
Project loss provisions The Group provides for onerous contracts based on the lower of the expected cost of fullling the contract and the expected cost of terminating the contract. Other provisions The Group provides for other contractual obligations based on the expected cost of executing any such contractual commitments. Share-based payment The Group established a share-based incentive program in 2012 under which options are granted to selected employees. The options will be cash-settled at exercise unless certain corporate transactions such as an initial public offering occur. For cash-settled share-based payment transactions, the employee services received and the liability incurred are measured at the fair value of the liability. The fair value of the options is determined based on the reporting date estimated value of shares less the exercise price of the options. The fair value of the liability is remeasured at each reporting date and at the date of settlement and the related change in fair value is recognized in the income statement. Dividends Dividends are recognized in the consolidated nancial statements of the Group when approved by the Board of Directors and by the Annual General Meeting of the Shareholders in accordance with the Articles of Association of Nokia Siemens Networks B.V. Use of estimates and critical accounting judgments The preparation of nancial statements in conformity with IFRS requires the application of judgment by management in selecting appropriate assumptions for calculating nancial estimates which inherently contain some degree of uncertainty. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Set forth below are areas requiring signicant judgment and estimation that may have an impact on reported results and the nancial position. Revenue recognition The majority of the Groups sales are recognized when the signicant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that the economic benets associated with the transaction will ow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Sales may materially change if managements assessment of such criteria was determined to be inaccurate.
Annual Report 2012
73
The Group enters into transactions involving multiple components consisting of any combination of hardware, services and software. The commercial effect of each separately identiable component of the transaction is evaluated in order to reect the substance of the transaction. Revenue is allocated to each separately identiable component based on the relative fair value of each component. The Group determines the revenue recognition method for each component based on the scope of work, including the nature of the services rendered. The revenue for each component is recognized when the revenue recognition criteria for that component have been met. Determination of the fair value for each component requires the use of estimates and judgment taking into consideration factors such as the price when the component is sold separately by the Group or the price when a similar component is sold separately by the Group or a third party, which may have a signicant impact on the timing and amount of revenue recognition. Revenue from contracts involving solutions achieved through the modication of complex telecommunications equipment is recognized on the percentage of completion basis when the outcome of the contract can be estimated reliably. Recognized revenues and prots are subject to revisions during the project in the event that the assumptions regarding the overall project outcome are revised. Current sales and prot estimates for projects may materially change due to the early stage of a long-term project, new technology, changes in the project scope, changes in costs, changes in timing, changes in customers plans, realization of penalties, and other corresponding factors. Refer to Note 4 Revenue recognition. Customer nancing The Group has provided a limited number of customer nancing arrangements and agreed extended payment terms with selected customers. Should the actual nancial position of the customers or general economic conditions differ from assumptions, the collectability of such arrangements may be required to be reassessed, which could result in a write-off of these balances in future periods. The Group endeavors to mitigate this risk through the transfer of its rights to the cash collected from these arrangements to third party nancial institutions on a non-recourse basis in exchange for an upfront cash payment. Refer to Note 16, Fair value of nancial instruments. Allowances for doubtful accounts The Group maintains allowances for doubtful accounts for estimated losses resulting from the subsequent inability of customers to make the required payments. If the nancial conditions of customers were to deteriorate, reducing their ability to make payments, additional allowances may be required in future periods. Refer to Note 20, Allowances for doubtful accounts. Inventory-related allowances The Group periodically reviews inventory for excess amounts, obsolescence and declines in market value below cost and records an allowance against the inventory balance for any such declines. These reviews require management to estimate future demand for products. Possible changes in these estimates could result in revisions to the valuation of inventory in future periods. Refer to Note 18, Inventories.
Warranty provisions The Group provides for the estimated cost of product warranties at the time revenue is recognized. The Groups warranty provision is established based upon best estimates of the amounts necessary to settle future and existing claims on products sold as of each statement of nancial position date. As new products incorporating complex technologies are continuously introduced, and as local laws, regulations and practices may change, changes in these estimates could result in additional allowances or changes to recorded allowances required in future periods. Refer to Note 28, Provisions. Restructuring provisions The Group provides for the estimated future cost related to restructuring programs. The restructuring provision is based on managements best estimate. Restructuring costs primarily relate to personnel restructuring and changes in estimates of timing or amounts of costs to be incurred may become necessary as the restructuring program is implemented. Refer to Note 28, Provisions. Business combinations The Group applies the acquisition method of accounting to account for acquisitions of separate entities or businesses. The consideration transferred in a business combination is measured as the aggregate of the fair values of the assets transferred, liabilities incurred towards the former owners of the acquired business and equity instruments issued. Identiable assets acquired and liabilities assumed by the Group are measured separately at their fair values as of the acquisition date. The excess of the aggregate of the consideration transferred over the acquisition date fair values of the identiable net assets acquired is recorded as goodwill. The determination and allocation of fair values to the identiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring management judgment. Actual results may differ from the forecasted amounts and the difference could be material. Refer to Note 8, Acquisitions and disposals. Assessment of the recoverability of long-lived and intangible assets and goodwill The recoverable amounts for long-lived assets, intangible assets and goodwill have been determined based on the expected future cash ows attributable to the asset or cash-generating units discounted to present value. The key assumptions applied in the determination of the recoverable amount include the discount rate, length of the explicit forecast period and estimated growth rates, prot margins and level of operational and capital investment. Amounts estimated could differ materially from what will actually occur in the future. Refer to Note 9, Impairment. Fair value of derivatives and other nancial instruments The fair value of nancial instruments that are not traded in an active market (for example, unlisted equities and embedded derivatives) is determined using various valuation techniques. The Group uses judgment to select an appropriate valuation methodology as well as underlying assumptions based on existing market practice and conditions. Changes in these assumptions may cause the Group to recognize impairments or losses in future periods. Refer to Note 16, Fair value of nancial instruments, Note 17, Derivative nancial instruments and Note 34, Financial and capital risk management.
74
Income taxes Management judgment is required in determining income tax expense, tax provisions, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognized. When circumstances indicate it is no longer probable that deferred tax assets will be utilized, they are assessed for realizability and adjusted as necessary. If the nal outcome of these matters differs from the amounts recorded initially, differences may impact the income tax expense in the period in which such determination is made. Refer to Note 12, Income tax expense and Note 26, Deferred Taxes. The utilization of deferred tax assets is dependent on future taxable prot in excess of the prots arising from reversal of existing taxable temporary differences. The recognition of deferred tax assets is based upon whether it is more likely than not that sufcient taxable prots will be available in the future from which the reversal of temporary differences and tax losses can be deducted. Recognition therefore involves judgment with regard to future nancial performance of a particular legal entity or tax group in which the deferred tax asset has been recognized. Pensions The determination of pension obligations and expenses for dened benet pension plans is dependent on certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, the discount rate, expected long-term rate of return on plan assets and annual rate of increase in future compensation levels. A portion of plan assets is invested in equity securities which are subject to equity market volatility. Changes in assumptions and actuarial conditions may materially affect the pension obligation and future expense. Refer to Note 6, Pensions. New accounting pronouncements under IFRS The Group will adopt the following new and revised standards, and amendments and interpretations to existing standards issued by the IASB that are expected to be relevant to its operations: IFRS 9, Financial Instruments, will change the classication, measurement and impairment of nancial instruments based on the Groups objectives for the related contractual cash ows. IFRS 10, Consolidated Financial Statements, establishes principles for the presentation and preparation of consolidated nancial statements when an entity controls one or more other entities. IFRS 11, Joint Arrangements, establishes that the legal form of an arrangement should not be the most signicant factor in the determination of the appropriate accounting for the arrangement. Each party in a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and then accounts for those rights and obligations in accordance with that type of joint arrangement. IFRS 12, Disclosure of Interests in Other Entities, requires the disclosure of information that enables users of nancial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its nancial position, nancial performance and cash ows. IFRS 13, Fair Value Measurement, replaces fair value measurement guidance contained within individual IFRSs with a single, unied
denition of fair value in a single new IFRS standard. The new standard provides a framework for measuring fair value, related disclosure requirements about fair value measurements and further authoritative guidance on the application of fair value measurement in inactive markets. Amended IAS 19, Employee Benets, discontinues the use of thecorridor approach and remeasurement impacts will be recognized in other comprehensive income. Net interest expense as a product of discount rate and net pension liability will be recognized in the income statements while the effect from the difference between the discount rate and actual return on plan assets will be reected in remeasurements within other comprehensive income. Previously unrecognized actuarial gains and losses are also recognized in other comprehensive income. Other long-term benets are required to be measured in the same way even though changes in the recognized amount are recognized in prot or loss. Treatment for termination benets, specically the point in time when an entity would recognize a liability for termination benets, is also revised. The effective date for IFRS 10, IFRS 11 and IFRS 12 is January 1, 2013, as issued by the IASB. In December 2012, the EU endorsed adoption of these standards for companies in the EU, with a mandatory effective date of January 1, 2014, earlier adoption is permitted. The Group will early adopt these standards on January 1, 2013 and will also adopt IFRS 13 and the amended IAS 19 on their effective date, January 1, 2013. On December 16, 2011 the IASB amended the effective date of IFRS9 to annual periods beginning on or after January 1, 2015, andmodied the relief from restating comparative periods and the associated disclosures in IFRS 7, Financial Instruments: Disclosures. The Group will adopt the standard on the revised effective date. The Group does not currently expect the adoption of the amended IAS 19 to have a material impact on the nancial condition and the results of operations of the Group on a going forward basis. However, the standard requires retrospective application for all nancial statements presented including previous years. While the Group does not anticipate a material impact to prior period income statements as a result of the retrospective application, the Group expects a material change in the net pension liabilities and other comprehensive income due to the elimination of the corridor approach. For 2012, there will be approximately EUR 174 million (EUR 14 million for 2011) increase in our pension liabilities, approximately EUR 156 million (EUR 12 million for 2011) decrease, net of tax, in our other comprehensive income, and approximately EUR 10 million and (EUR 3 million for 2011) increase in our net deferred tax asset. Excluding the impacts of the amended IAS 19, the Group does not expect that the adoption of the other standards effective January 1, 2013 will have a material impact.
Annual Report 2012
75
2 Specic items
The Group separately identies and discloses certain items, referred to as specic items, by virtue of size, nature or occurrence, including restructuring charges, country/contract exit charges, purchase price accounting (PPA) related charges and asset impairment charges. This is consistent with the way that nancial performance is measured by management and reported to the senior management team and Board of Directors and it assists in providing a meaningful analysis of operating results by excluding items that may not be indicative of the operating results of the Groups business. In November 2011, the Group announced a strategic shift to focus on the mobile network infrastructure market. This involved a decision to focus the Groups portfolio on its core protable businesses and sell or ramp down non-core businesses. The Group also narrowed its regional focus to make the high value and technologically advanced Japan, South Korea and USA its priority countries and to review certain underperforming countries or contracts with a view to exiting if necessary. At the same time, the Group announced its intention to reduce its workforce by 17,000employees by the end of 2013. In 2012, the Group made signicant progress in executing this plan both in terms of focusing on the mobile network infrastructure business, divesting several businesses, exiting certain underperforming customer contracts, withdrawing from certain countries and making signicant reductions in headcount. The associated charges are included in the tables below. The following table presents specic items included in the operating prot/loss for the Groups continuing operations for the years ended December 31, 2012, 2011 and 2010:
Country/ contract exit and mergerRestructuring related charges charges
EURm
PPA related charges
Other one-time charges
Total
2012 Cost of sales Research & development expenses Selling & marketing expenses Administrative & general expenses Other expenses Total 2011 Cost of sales Research & development expenses Selling & marketing expenses Administrative & general expenses Other expenses Total 2010 Cost of sales Research & development expenses Selling & marketing expenses Administrative & general expenses Other expenses Total
564 170 116 155 50 1 055 28 26 17 13 19 103 60 27 15 43 27 172
89 18 107 12 2 5 23 42 114 (8) 6 33 145
38 266 4 308 11 79 308 1 399 193 286 479
87 6 93
653 208 382 242 78 1 563 51 107 330 37 19 544 174 212 307 76 27 796
The following table presents specic items included in the operating prot/loss for the Groups discontinued operations, Optical Networks, for the years ended December 31, 2012, 2011 and 2010:
2012 Restructuring charges Other one-time charges 2011 PPA related charges 2010 PPA related charges
EURm
Total
Cost of sales Research & development expenses Other expenses Total
1 6 7
23 23
1 6 23 30
2 2
7 7
76
Restructuring charges in 2012 consist primarily of personnel restructuring charges (EUR 911 million). The other main components are real estate exit costs and a loss, net of gains, of EUR 50 million arising from the sale of divested businesses (refer to Note 8, Acquisitions and disposals). Restructuring charges in 2011 consisted primarily of personnel restructuring charges (EUR 68 million) and impairment charges as a result of writing down the carrying amount of certain disposal groups classied as held for sale to the fair value less costs to sell (refer to Note 31, Non-current assets and disposal groups classied as held for sale). Restructuring charges in 2010 related to personnel restructuring (EUR 114 million) and structural restructuring for outsourcing and closing manufacturing sites and other real estate locations. In 2012, country/contract exit charges relate to the realignment of the Groups customer contract and geographic market portfolio and the related charges to terminate certain underperforming contracts and to withdraw from certain countries in line with the Groups restructuring program. Merger-related charges in 2011 and 2010 related to the realignment of the product portfolio and the related charges to replace discontinued products at customer sites in connection with the Groups formation. Purchase price accounting (PPA) related charges primarily consist of the amortization of nite lived intangible assets (customer relationships, developed technology and licenses to use tradename and trademark) recognized in the purchase price allocation stemming from the Groups formation and subsequent business combinations. In 2012, other one time charges consist of consultancy fees in connection with the restructuring program included in administrative and general expenses and impairment charges of EUR 6 million for continuing operations and EUR 23 million for discontinued operations included in other expenses (refer to Note 9, Impairment and Note 31, Non-current assets and disposal groups classied as held for sale) in theconsolidated income statement.
3 Segment information
The Groups chief operating decision-maker (CODM) is a group of executive ofcers comprising the Chief Executive Ofcer, the Chief Financial Ofcer and the Chief Operating Ofcer. Operating segments have been determined based on the information reviewed by the chief operating decision-maker for the purposes of allocating resources and assessing performance. The chief operating decision-maker considers the business from both a geographic and product perspective. The set of components that constitutes the Groups operating segments has been determined by reference to the core principle governing segment reporting, that is, based on the provision of information that enables evaluation of the nature and nancial effects of the business activities in which the Group engages and the economic environments in which it operates. Disclosure of information by product dimension is considered to best fulll this requirement. The Group consists of four product-based operating segments: Mobile Broadband, Global Services, Optical Networks and Non-core. At December 31, 2012 Optical Networks is classied as a disposal group held for sale and as it has represented a separate major line of business in the past, it is presented as discontinued operations (refer to Note 31, Non-current assets and disposal groups classied as held for sale). As such, it has been excluded from segment reporting. The Non-core segment does not qualify as a reportable segment in 2012 as it represents less than 10% of the Groups revenue and operating results. Mobile Broadband provides radio and core network hardware and software to mobile operators as well as related software and essential services. Global Services provides professional services including network planning and optimization, the complete management of network operations, the care and maintenance of network hardware and software and also network implementation and turnkey solutions. Management assesses the performance of the operating segments based on a measure of operating prot that excludes specic items (for an analysis of specic items, refer to Note 2, Specic items). The costs of central functions and the Groups worldwide sales and marketing organization have been allocated to the segments based on the utilization of the respective resources. Taxes, nancial income and expenses, other nancial results and share of results of associates are not allocated to segments. There are no transactions between the segments. Segment revenue as reported here is measured largely in a manner consistent with revenue as reported in the consolidated income statement. Group level adjustments related to customer projects accounted for under the percentage of completion accounting method have been allocated to the segments. No single customer represents 10% or more of Group revenues. No measures of assets and liabilities by segment are reviewed by the chief operating decision-maker.
Annual Report 2012
77
EURm
Mobile Broadband
Global Services
All other segments
Total segments
Other
Total
2012 Net sales Operating prot/(loss) before specic items Operating prot/(loss) before specic items % Depreciation and amortization (excluding PPA related charges) PPA related charges Restructuring charges 2011 Net sales Operating prot/(loss) before specic items Operating prot/(loss) before specic items % Depreciation and amortization (excluding PPA related charges) PPA related charges Restructuring charges 2010 Net sales Operating prot/(loss) before specic items Operating prot/(loss) before specic items % Depreciation and amortization (excluding PPA related charges) PPA related charges Restructuring charges
6 043 488 8.1% 199 158 283 6 335 214 3.4% 220 195 27 5 789 153 2.6% 263 271 83
6 929 332 4.8% 66 130 414 6 737 229 3.4% 71 119 24 5 889 84 1.4% 67 104 32
365 (33) (9.0)% 7 6 93 573 (108) (18.8)% 14 15 19 528 (71) (13.4)% 13 34
13 337 787 272 294 790 13 645 335 305 329 70 12 206 166 343 409 115
35 35 14 265 70 33 70 57
13 372 822 6.1% 272 308 1 055 13 645 335 2.5% 305 399 103 12 206 166 1.4% 343 479 172
For an analysis of specic items, refer to Note 2, Specic items. Net sales by geographic area The table below presents the Groups net sales by geographic area by location of customer:
EURm
2012
2011
2010
North East Europe West Europe1 South East Europe Africa Europe & Africa Middle East Greater China Japan India APAC Asia & Middle East North America Latin America Americas Total
1
891 1 900 1 039 548 4 378 687 1 278 2 173 737 1 270 6 145 1 201 1 648 2 849 13 372 111
1 107 2 032 1 257 579 4 975 817 1 457 1 533 911 1 176 5 894 1 018 1 758 2 776 13 645 185
1 086 2 115 1 378 514 5 093 876 1 448 704 885 1 110 5 023 649 1 441 2 090 12 206 113
Of which the Netherlands (country of domicile)
78
Non-current assets The table below presents the Groups largest countries in terms of non-current assets:
EURm
2012
2011
Finland USA China India Japan Germany Poland Other Total The Netherlands (country of domicile)
452 183 107 74 66 24 24 148 1 078
334 311 177 95 71 62 32 431 1 513 1
Non-current assets comprise intangible assets and property, plant and equipment.
4 Revenue recognition
The following table presents net sales for continuing operations for the years ended December, 31:
EURm
2012
2011
2010
Contract sales recognized under percentage of completion accounting Services revenue for managed services and network maintenance contracts Sales of telecommunication equipment, software and related services not involving the modication of complex telecommunication equipment Total net sales
3 431 2 603 7 338 13 372
4 769 2 942 5 934 13 645
5 094 2 872 4 240 12 206
The following revenue recognition related items are included in the consolidated statement of nancial position:
2012 EURm Assets Liabilities 2011 Assets Liabilities
Contract revenues recorded prior to billings Billings in excess of costs incurred Advances received related to construction Retentions related to construction contracts
700 216 58 100
1 267 260 95 136
All assets in the above table are included within accounts receivable and all liabilities are included within accrued expenses in the statement ofnancial position. The aggregate amount of costs incurred and recognized prots (net of recognized losses) for construction contracts in progress is EUR18107 million at December 31, 2012 (EUR 20 077 million in 2011).
Annual Report 2012
79
5 Employee benets expense

EURm 2012 2011 2010
Salaries and wages Share-based payment expense/(income) Pension expenses Other social expenses Total
3 744 11 204 494 4 453
3 466 (8) 196 482 4 136
3 015 (5) 186 414 3 610
Pension expenses include expenses related to dened contribution plans of EUR 164 million (EUR 153 million in 2011 and EUR 141 million in2010). The average monthly number of employees in 2012 was 64 052 (71 882 in 2011 and 65 379 in 2010).
6Pensions
The Groups largest dened benet pension plans are in Germany where individual benets are generally based on eligible compensation levels and/or ranking within the company and years of service. The majority of active employees in Germany participate in the pension scheme BAP (Beitragsorientierter Altersversorgungs Plan), formerly known as Beitragsorientierte Siemens Altersversorgung. This plan is a partly funded dened benet pension plan, the benets of which are predominantly based on contributions made by the company and returns earned on such contributions, subject to a minimum return guaranteed by the company. Prior to this plan, employees participated in the IP-Plan (Individuelle Pensionszusage), which was closed to new entrants in 2003 and any entitlement previously earned was integrated into the BAP. The funding vehicle for the BAP and former IP plan is the NSN Pension Trust e.V. Other signicant plans are in Switzerland, India and the United Kingdom (UK). In Switzerland, individual benets are provided through the collective foundation Profond. The plans benets are based on age, years of service, salary and on an individual old age account. The funding vehicle for the pension scheme is the Profond Vorsorgeeinrichtung. In India, government mandated Gratuity and Provident plans provide benets based on years of service and projected salary levels at date of separation for the Gratuity plan and through an interest rate guarantee on existing investments in a Government prescribed Provident Fund Trust. In the UK, individual benets are generally dependent on eligible compensation levels and years of service for the dened benet section of the plan and on individual investment choices for the dened contribution section of the plan. The funding vehicle for the pension plan is the Nokia Siemens Networks Pension Plan that is run on a Trust basis. In addition, the Group operates a number of post-employment benet plans in various other countries. These plans include both dened contribution and dened benet plans.
80
Dened benet pension plans The following table reconciles the opening and closing balances of the dened benet obligation and the fair value of plan assets at December 31:
EURm
2012
2011
Present value of dened benet obligation at beginning of year Foreign currency exchange rate changes Current service cost Interest cost Plan participants contributions Past service cost loss Actuarial loss Acquisitions and divestments Curtailments1 Settlements Benets paid Other movements2 Present value of dened benet obligation at end of year Plan assets at fair value at beginning of year Foreign currency exchange rate changes Expected return on plan assets Actuarial gain/(loss) on plan assets Employer contribution Plan participants contributions Benets paid Acquisitions and divestments Settlements Other movements2 Plan assets at fair value at end of year
1 2
(1 221) 2 (49) (56) (15) (2) (220) 14 13 12 47 (2) (1 477) 1 124 (2) 56 61 31 15 (32) (12) (9) 1 1 233
(1 088) 3 (47) (56) (8) (1) (7) (1) 3 16 28 (63) (1 221) 1 050 (2) 52 (48) 34 8 (21) (2) (10) 63 1 124
In 2012, the Group recognized curtailments related to restructuring in various countries including Germany, Belgium, Switzerland and the Netherlands. In 2011, the Group reclassied an existing pension plan as a dened benet plan due to a requirement to cover a shortfall in the return on plan assets. This reclassication did not have a material impact on the Groups nancial statements.
The following table reconciles the present value of the dened benet obligation and the fair value of plan assets to the accrued pension cost recognized in the statement of nancial position:
EURm
2012
2011
Present value of dened benet obligation Fair value of plan assets Decit Unrecognized past service cost Unrecognized net actuarial loss Amount not recognized as an asset in the statement of nancial position due to the limit in IAS 19 paragraph 58(b) Accrued pension cost in statement of nancial position
(1 477) 1 233 (244) 1 171 (2) (74)
(1 221) 1 124 (97) 1 16 (2) (82)
The present value of the dened benet obligation includes EUR 243 million (EUR 126 million in 2011) of wholly funded obligations, EUR1196million (EUR 1 055 million in 2011) of partly funded obligations and EUR 38 million (EUR 40 million in 2011) of unfunded obligations.
Annual Report 2012
81
The amounts recognized in the income statement are as follows:
EURm
2012
2011
2010
Current service cost Interest cost Expected return on plan assets Net actuarial loss/(gain) recognized Past service cost loss Impact of IAS 19 paragraph 58(b) Curtailments and settlements Total included in employee benets expense
49 56 (56) 5 2 (16) 40
47 56 (52) 7 1 (7) (9) 43
47 52 (55) (3) 1 3 45
The movements in accrued pension cost recognized in the statement of nancial position are as follows:
EURm
2012
2011
Accrued pension cost at beginning of year Net expense recognized Contributions paid Benets paid Acquisitions and divestments Foreign currency exchange rate changes Accrued pension cost at end of year
82 40 (31) (15) (2) 74
78 43 (34) (6) 2 (1) 82
The net accrued pension cost above is made up of an accrual of EUR 106 million included in other long-term liabilities (EUR 108 million in 2011), a prepayment of EUR 41 million included in prepaid expenses and accrued income (EUR 31 million in 2011) and EUR 9 million reclassication to liabilities included in disposal groups classied as held for sale (EUR 5 million in 2011). Refer to Note 31, Non-current assets and disposal groups classied as held for sale. The following table shows the decit or surplus in the Groups plans and the history of experience adjustments:
EURm
2012
2011
2010
2009
2008
Present value of dened benet obligation Fair value of plan assets (Decit)/surplus Experience adjustment (loss)/gain on plan obligations Experience adjustment gain/(loss) on plan assets
(1 477) 1 233 (244) (21) 61
(1 221) 1 124 (97) 21 (48)
(1 088) 1 050 (38) 19 (9)
(964) 955 (9) 1 41
(822) 847 25 31 3
The principal actuarial weighted average assumptions used are as follows:
2012
2011
Discount rate for determining present values Ination rate Expected long-term rate of return on plan assets Annual rate of increase in future compensation levels Pension increases
3.54 1.82 3.11 2.36 1.64
4.89 1.83 4.50 2.39 1.60
82
The Groups weighted average pension plan asset allocation as a percentage of plan assets by asset category at December 31 is as follows:
2012
2011
Asset category: Equity securities Debt securities Insurance contracts Real estate Short-term investments Other Total
24 56 5 5 4 6 100
22 59 5 5 4 5 100
The objective of the investment activities is to maximize the excess of plan assets over projected benet obligations, within an accepted risk level, taking into account the interest rate and ination sensitivity of the assets as well as the obligations. Additionally, the objective is to generate an efcient strategic asset allocation in accordance with the Groups investment policy to achieve the required return on pension assets. The total expected return on plan assets is based on the expected return multiplied by the respective percentage weight of the market-related value of plan assets. The expected return is dened on a uniform basis, reecting long-term historical returns, current market conditions and strategic asset allocation. In 2012, the actual return on plan assets was EUR 117 million (EUR 4 million in 2011). In 2013, the Group expects to make contributions of EUR 25 million to its dened benet pension plans.
7 Other income and expenses

Other income totals EUR 105 million in 2012 (EUR 92 million in 2011 and EUR 97 million in 2010). None of the items within this total are individually signicant. Other expenses total EUR 223 million in 2012 (EUR 79 million in 2011 and EUR 142 million in 2010). This includes a loss, net of gains, of EUR 50 million arising from the sale of divested businesses (refer to Note 8, Acquisitions and disposals), EUR 40 million costs resulting from the sale of receivables transactions, EUR 38 million of expense that is the net result of bad debt write-offs and changes to the doubtful account allowances (refer to Note 20, Allowances for doubtful accounts) and EUR 23 million impairment charges in connection with the Optical Networks business (refer to Note 9, Impairment and Note 31, Non-current assets and disposal groups classied as held for sale). Other income in 2011 included a gain of EUR 9 million on the sale of real estate in Beijing, China. Other expenses included EUR 35 million of income that is the net result of bad debt write-offs and changes to the doubtful account allowances (refer to Note 20, Allowances for doubtful accounts) and costs of EUR 33 million resulting from sale of receivables transactions. Other expenses also included impairment charges of EUR 19 million as a result of writing down the carrying amount of certain disposal groups classied as held for sale to the fair value less costs to sell (refer to Note 9, Impairment). Other income in 2010 included EUR 21 million which mainly relates to interest or amounts paid in excess to the Brazil Instituto Nacional do Seguro Social (INSS or National Institute for Social Security). The Group had the right to recover the interest receivable and overpayments made from the INSS. Other expenses included EUR 28 million in charges related to the transfer of the Groups Italian Radio Access activities to Value Team SpA, an IT consulting and solutions company of the Value Partners Group. In all three years presented, other income and expenses also include the fair value changes of derivatives hedging identiable and probable forecasted cash ows and the costs and income of hedging forecasted sales and purchases (forward points of cash ow hedges).
Annual Report 2012
83
8 Acquisitions and disposals

Acquisitions completed in 2012 There were no acquisitions effected in 2012. On April 30, 2012 the Group completed the accounting for the Motorola Solutions networks business combination, which was effected on April 30, 2011. The acquired business consisted of Motorola Solutions wireless networks infrastructure equipment manufacturing and sales operations, including the GSM, CDMA, WCDMA, WiMAX and LTE product portfolios and services offerings, and was carried out through a combination of asset and share deals. The business acquisition strengthened the Groups position in certain regions, particularly North America and Japan. The goodwill of EUR 164 million arising from the acquisition is attributable to the increased presence in these key markets and the assembled workforce. The majority of the goodwill acquired is deductible for income tax purposes. The following table summarizes additional adjustments identied during the measurement period and the nal fair values of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date:
Provisional fair values Final fair values
EURm
Adjustments
Total cash consideration Non-current assets Goodwill Intangible assets subject to amortization: Developed technology Customer relationships Other intangible assets Property, plant and equipment Investments in associates Deferred tax assets Current assets Inventories Accounts receivable Prepaid expenses and accrued income Bank and cash Total assets acquired Non-current liabilities Deferred tax liabilities Other long-term liabilities Current liabilities Accounts payable Accrued expenses Provisions Total liabilities assumed Non-controlling interest Net assets acquired
642 155 156 195 3 509 105 6 36 656 103 228 20 31 382 1 038 15 15 30 154 166 30 350 380 16 642
9 9 (8) 1 (6) (6) (5) (1) (2) (2) (5) (5)
642 164 156 195 3 518 97 6 36 657 103 222 20 31 376 1 033 15 15 30 153 164 28 345 375 16 642
The fair values of developed technology and customer relationships acquired in the deal have been estimated through relief from royalty and excess earnings methods of valuation, respectively. Key assumptions applied in the valuation models included royalty rates ranging from 3% to 10% for the developed technology, and a discount rate of 14.1% for customer relationships.
84
The acquisition of the Motorola Solutions networks business included a contingent consideration arrangement that required Motorola Solutions to make installment payments to the Group subject to certain conditions being fullled by the Group. The maximum amount of installment payments under the arrangement, EUR 85 million, was received, of which EUR 68 million was received in 2012 and EUR 17 million in 2011. On receipt of the nal payment in 2012, EUR 4 million was recognized in the consolidated income statement as the consideration received was in excess of the fair value of the EUR 81 million receivable recognized. The fair value of accounts receivable of EUR 222 million includes trade receivables with a fair value of EUR 146 million. The gross contractual amount for trade receivables due at the date of acquisition was EUR 255 million, of which EUR 109 million was expected to be uncollectible. Acquisition-related costs of EUR 4 million and EUR 8 million for 2011 and 2010, respectively, are included in the consolidated income statement in administrative and general expenses. From the date of acquisition on April 30, 2011 the Group included net sales of EUR 894 million and a net loss of EUR 4 million for the year ended December 31, 2011 in respect of the acquired Motorola Solutions networks business. The net loss included EUR 39 million related to restructuring charges and EUR 48 million related to the amortization of acquired intangible assets and other purchase price accounting related charges. The Groups net sales and net loss for the year ended December 31, 2011 would have been EUR 14 828 million and EUR 612 million, respectively, had the acquisition occurred on January 1, 2011. This unaudited pro forma information is not necessarily indicative of the results of the combined operations had the acquisition actually occurred on January 1, 2011 or indicative of the future results of the combined operations. The non-controlling interest (representing 49% of Motorola Solutions Hangzhou subsidiary) in the Motorola Solutions networks business recognized at the acquisition date was measured at the present ownership interests proportionate share in the recognized amounts of the acquirees net identiable assets and amounted to EUR 16 million. Other acquisitions effected in 2011 On January 3, 2011 the Group acquired 100% of the share capital of Iris Telekomnikasyon Mhendislik Hizmetleri A.S, a telecom and engineering services provider with its headquarters in Istanbul, Turkey. The purchase consideration paid and goodwill arising from the acquisition amounted to EUR 20 million and EUR 6 million, respectively. Acquisitions effected in 2010 There were no acquisitions in 2010. Disposals effected in 2012 In 2012, the Group divested several non-core businesses as part of the implementation of its strategy to focus on mobile broadband and services. On January 11, 2012 the Group entered into an agreement with Motorola Solutions Inc. to transfer all assets and liabilities related to the Norwegian nationwide TETRA Ndnett project, including associated employees. The transaction was completed on February 24, 2012. The sale of the WiMax business to NewNet Communication Technologies, LLC was completed on February 3, 2012. On May 3, 2012 the Group concluded the sale of its xed line broadband access business to Adtran Inc., and on June 1, 2012 the initial closing of the transaction to sell the microwave transport business to DragonWave Inc. was completed. Additionally, the Group carried out three other disposals that did not have a material impact on the consolidated nancial statements. The total net consideration paid in connection with these disposals amounted to EUR 124 million in cash. Additionally, shares with fair market value of EUR 5 million were received.
Annual Report 2012
85
The results of businesses disposed of are included in the consolidated income statement up to the date of disposal. The assets and liabilities disposed of were as follows:
EURm
2012
Property, plant and equipment Inventories Accounts receivable Prepaid expenses and accrued income Total assets disposed of Accounts payable Accrued expenses Provisions Total liabilities disposed of
1 24 28 1 54 19 13 117 149
Additionally, provisions of EUR 26 million were recognized for contractual obligations entered into at closing. A loss, net of gains, of EUR 50 million arising from the sale of these businesses is included in other expenses in the consolidated income statement. Disposals effected in 2011 There were no disposals in 2011. Disposals effected in 2010 On May 12, 2010 the Group completed the transfer of its Radio Access activities in Italy to Value Team SpA, an IT consulting and solutions company of the Value Partners Group. The two companies also signed a long-term collaboration agreement which denes Value Team as one of the Groups preferred partners in the development of new technologies, mainly in mobile networks. In 2010, the Group also completed the divestment of its cable television business in Luxembourg, and the sale of 100% ownership in Garderos Software Innovations GmbH in Germany. Total consideration received for the disposals in 2010 amounted to EUR 11 million in cash. In 2011, an additional EUR 1 million of cash was received in relation to divestments effected in 2010. The assets and liabilities disposed of were as follows:
EURm
2010
Property, plant and equipment Inventories Accounts receivable Bank and cash Total assets disposed of Accounts payable Accrued expenses Total liabilities disposed of
7 1 24 12 44 1 8 9
86
9Impairment
Goodwill 2012 For the purpose of impairment testing, goodwill is allocated to the Groups cash-generating units or groups of cash-generating units (CGUs) that are expected to benet from the synergies of the business combination in which the goodwill arose. The recoverable amounts of the groups of cash-generating units were determined based on the fair value less costs to sell approach. In the absence of observable market prices, the fair values less costs to sell were estimated based on an income approach, specically a discounted cash ow model. The cash ow projections employed in the model were based on nancial plans approved by management covering an explicit forecast period of three years. Cash ows in the subsequent periods reect a realistic pattern of slowing growth that declines towards an estimated terminal growth rate utilized in the terminal period. The terminal growth rates utilized do not exceed the long-term average growth rates for the industry and economies in which the cash-generating units operate. The projections utilized are consistent with external sources of information wherever available. The key assumptions applied in the impairment testing analysis and goodwill allocated to each group of cash-generating units at December 31, 2012 are presented in the table below:
Carrying amount of goodwill Terminal growth rate Discount rate Post-tax Pre-tax
EURm
Radio Access Networks group of CGUs Global Services group of CGUs Total
90 92 182
1.37% 0.00%
10.88% 9.68%
14.74% 13.33%
Other key variables within the future cash ow projections utilized include assumptions around estimated sales growth and gross margin. Due to exchange rate uctuations, the goodwill allocated to the Global Services group of cash-generating units which is largely denominated in US dollars, is EUR 1 million less at December 31, 2012 compared to the euro value at September 30, 2012, the date of goodwill impairment testing. The goodwill impairment testing analysis did not result in impairment charges. A sensitivity analysis has been carried out with respect to the gross margin and discount rate assumptions applied. The recoverable amounts calculated based on the sensitized assumptions do not indicate impairment. Further, no reasonably possible changes in other key assumptions on which the Group has based its determination of the recoverable amounts would result in impairment charges. 2011 Goodwill impairment testing was performed at December 31, 2011 following the Groups announcement of a new strategy and related restructuring in November 2011. For the purpose of the impairment testing, goodwill which was provisional with respect to the business acquired from Motorola Solutions was allocated on a provisional basis to the Groups cash-generating units as follows:
Carrying amount of goodwill
EURm
Network Systems Global Services Business Solutions Total
83 90 173
The recoverable amounts of the cash-generating units were determined based on the fair value less costs to sell approach. In the absence of observable market prices, the fair value less costs to sell was estimated based on an income approach, specically a discounted cash ow model.
Annual Report 2012
87
The cash ow projections employed in the model were based on nancial plans approved by management. These projections are consistent with external sources of information, wherever available. Cash ows beyond the explicit forecast period of four years were extrapolated by applying an estimated residual growth rate of 1% for the cash-generating units. This residual growth rate does not exceed the long-term average growth rates for the industry and economies in which the cash-generating units operate. The post-tax cash ow projections of the cash-generating units were discounted using a post-tax discount rate of 10.36%, which corresponds to a pre-tax discount rate of 13.77%. Other key variables within the future cash ow projections include assumptions around estimated sales growth and gross margin. The goodwill impairment testing analysis did not result in impairment charges. A sensitivity analysis was carried out by applying lower estimated gross margin assumptions and certain execution risk adjustments to expected savings in operating expenses. The recoverable amounts calculated based on these sensitized assumptions did not indicate impairment. Further, no reasonably possible changes in other key assumptions on which the Group had based its determination of the cash-generating units recoverable amounts would have resulted in impairment charges. Other intangible assets The Group recognized a charge of EUR 8 million on intangible assets in connection with its decision to cease product development for certain operations. This impairment charge is included in other expenses in the consolidated income statement. In 2011, in connection with the Groups announcement of a new strategy and related restructuring in November 2011 and as part of the goodwill impairment testing, the Group conducted an assessment of the carrying amounts of the identiable intangible and tangible assets that were allocated to the above cash-generating units and concluded that the carrying amounts were recoverable. Investments in associates and other companies In 2012, the Group recognized an impairment charge of EUR 6 million to adjust investment in one of its associates to the recoverable amount. This impairment charge is recognized in other expenses in the consolidated income statement. Non-current assets and disposal groups held for sale In 2012, the Group recognized impairment charges of EUR 23 million on the property, plant and equipment of the Optical Networks business as a result of writing down the carrying amount to the fair value less costs to sell (refer to Note 31, Non-current assets and disposal groups classied as held for sale). This impairment charge is included within other expenses in the consolidated income statement. In 2011, the Group recognized impairment charges totaling EUR 19million as a result of writing down the carrying amount of certain disposal groups classied as held for sale to the fair value less costs to sell. The impairment charge is included in other expenses in the consolidated income statement.
10 Depreciation and amortization

Depreciation and amortization by function:
EURm
2012
2011
2010
Depreciation and amortization by function Cost of sales Research and development Selling and marketing Administrative and general Total
74 180 271 62 587
74 261 312 64 711
70 424 291 58 843
The above table includes depreciation and amortization related to discontinued operations, totaling EUR 11 million in 2012 (EUR 19 million in 2011 and EUR 20 million in 2010).
88
11 Financial income and expenses

EURm 2012 2011 2010
Interest income on available-for-sale nancial instruments Interest income on loans receivables carried at amortized cost Other nancial income Financial income Interest expense on nancial liabilities carried at amortized cost Other nancial expenses Financial expense Net foreign exchange (losses)/gains: From foreign exchange derivatives designated at fair value through prot andloss From statement of nancial position items revaluation Net losses on other derivatives designated at fair value through prot and loss Other nancial results Total
13 1 1 15 (113) (10) (123) (28) (171) (199) (307)
12 1 2 15 (95) (13) (108) 58 (114) (2) (58) (151)
11 3 14 (137) (20) (157) (356) 255 (4) (105) (248)
12 Income tax expense

EURm 2012 2011 2010
Income tax expense/(benet) Current tax Deferred tax Total Netherlands Other countries Total
239 103 342 (9) 351 342
270 (36) 234 (13) 247 234
255 (91) 164 47 117 164
The difference between the income tax expense computed at the statutory rate in the Netherlands of 25% (25% in 2011 and 25.5% in 2010) and income taxes recognized in the consolidated income statement is reconciled as follows at December 31:
EURm
2012
2011
2010
Income tax benet at statutory rate Permanent differences Taxes for prior years Effect of different statutory tax rates in foreign subsidiaries Net change in tax contingencies Changes in income tax rates Increase in valuation adjustments of deferred tax assets1 Benet arising from previously unrecognized tax losses and temporary differences Change of deferred tax liability on undistributed earnings Other Income tax expense
1
(260) 31 (18) (28) (24) 5 640 1 (5) 342
(94) 30 1 12 5 6 265 (9) 9 9 234
(221) 102 73 (11) 2 2 278 (63) 4 (2) 164
In 2012, this item primarily relates to current year Finnish tax losses and temporary differences and past and current year German tax losses and temporary differences for which no deferred tax was recognized. In 2011 and 2010, this item primarily related to Finnish tax losses and temporary differences for which no deferred tax was recognized.
Income tax returns of certain Group companies for the years prior to and after the formation of the Group are under examination by the relevant tax authorities. The Group does not believe that any signicant additional taxes in excess of those already provided for will arise as a result of these examinations.
13 Intangible assets
EURm 2012 2011
Goodwill Acquisition cost January 1 Translation differences Acquisitions Accumulated acquisition cost December 31 Net book value January 1 Net book value December 31 Other intangible assets Acquisition cost January 1 Translation differences Additions Acquisitions Impairment losses Disposals and retirements Accumulated acquisition cost December 31 Accumulated amortization January 1 Translation differences Impairment losses Disposals and retirements Amortization Accumulated amortization December 31 Net book value January 1 Net book value December 31 Capitalized development costs Acquisition cost January 1 Disposals and retirements Accumulated acquisition cost December 31 Accumulated amortization January 1 Disposals and retirements Amortization Accumulated amortization December 31 Net book value January 1 Net book value December 31
1 2
173 (1) 10 182 173 182 3 021 (2) 25 (51) (17) 2 976 (2 328) (1) 43 16 (319) (2 589) 693 387 823 (7) 816 (817) 7 (6) (816) 6
12 161 173 173 2 625 24 16 365 (9) 3 021 (1 928) (1) 7 (406) (2 328) 697 693 823 823 (785) (32) (817) 38 6
Goodwill adjustment due to a fair value adjustment relating to the acquisition of Motorola Solutions networks business (refer to Note 8, Acquisitions and disposals). Capitalized development costs are included in Other intangible assets in the consolidated statement of nancial position.
At December 31, 2012 other intangible assets include customer relationships with a carrying value of EUR 217 million (EUR 466 million in 2011), developed technology with a carrying value of EUR 131 million (EUR 177 million in 2011), and licenses to use tradename and trademark of EUR 1 million (EUR 20 million in 2011). The remaining amortization period ranges from one month to three years for licenses to use tradename and trademark, from one month to ve years for developed technology and from three months to ve years for customer relationships.
90
14 Property, plant and equipment

EURm 2012 2011
Land and water areas Acquisition cost January 1 Translation differences Acquisitions Accumulated acquisition cost December 31 Net book value January 1 Net book value December 31 Buildings and constructions Acquisition cost January 1 Translation differences Additions Acquisitions Impairment losses Disposals and retirements Accumulated acquisition cost December 31 Accumulated depreciation January 1 Translation differences Disposals and retirements Depreciation Accumulated depreciation December 31 Net book value January 1 Net book value December 31 Machinery and equipment Acquisition cost January 1 Translation differences Additions Acquisitions Impairment losses Disposals and retirements Assets classied as held for sale Accumulated acquisition cost December 31 Accumulated depreciation January 1 Translation differences Impairment losses Disposals and retirements Assets classied as held for sale Depreciation Accumulated depreciation December 31 Net book value January 1 Net book value December 31 Fixed assets under construction Net carrying amount January 1 Translation differences Additions Acquisitions Disposals and retirements Transfers to: Other intangible assets Buildings and constructions Machinery and equipment Net carrying amount December 31 Total property, plant and equipment
1
9 1 10 9 10 266 (2) 32 (1) (32) 263 (96) 1 25 (43) (113) 170 150 1 673 173 (8) (86) (177) (44) 1 531 (1 247) 63 169 35 (219) (1 199) 426 332 36 (3) 13 (2) (5) (12) (10) 17 509
1 8 9 1 9 214 29 32 (9) 266 (56) (1) 6 (45) (96) 158 170 1 479 (4) 247 65 (10) (88) (16) 1 673 (1 103) (14) 82 14 (226) (1 247) 376 426 24 (1) 31 1 2 (8) (13) 36 641
Fair value adjustment relating to the acquisition of Motorola Solutions networks business (refer to Note 8, Acquisitions and disposals).
Annual Report 2012
91
15 Investments in associates
EURm 2012 2011
Net carrying amount of associates January 1 Translation differences Additions Share of results Dividends Impairment Disposals Share of other comprehensive income Net carrying amount of associates December 31
28 8 (6) (3) 4 31
42 (1) 6 (17) (2) 28
The Groups investments in associates are in unlisted companies in all years presented. The reporting date of the nancial statements used for calculation is within three months of the Groups period end, in accordance with the availability of nancial information of the Groups associates. In 2012, the Group recognized an impairment charge of EUR 6 million to adjust investment in one of its associates to the recoverable amount. There are no unrecognized losses in respect of associates (EUR 2 million in 2011). The following table presents the Groups principal associates. All amounts are in millions.
Assets Principal associates Local currency EUR Liabilities Local currency EUR Net sales Local currency EUR Prot/(loss) for the year Local currency EUR
2010 TD Tech Holding Ltd.1 Fujian Funo Mobile Communication Technology Ltd.2 2011 TD Tech Holding Ltd.1 Fujian Funo Mobile Communication Technology Ltd.2 2012 TD Tech Holding Ltd.1 Fujian Funo Mobile Communication Technology Ltd.2
1 2
1 785 351 741 426 542 440
174 40 73 51 53 54
1 298 97 769 145 419 141
127 11 76 18 41 17
4 689 230 1 570 292 2 264 234
452 25 144 32 227 29
220 24 (527) 28 152 18
21 3 (48) 3 15 2
Local currency is HKD. Local currency is CNY.
92
16 Fair value of nancial instruments

The following table presents the carrying amounts and the fair values of nancial instruments by measurement category at December 31:
Carrying amounts Financial assets and liabilities at fair value through prot or loss Loans and receivables measured at amortized cost Financial liabilities measured at amortized cost
EURm
Current Non-current availableavailablefor-sale for-sale nancial nancial assets assets
Total carrying amounts
Fair value
2012 Available-for-sale investments1 Long-term loans receivable2 Accounts receivable Current portion of long-term loans receivable3 Derivatives and other current nancial assets Fixed income and money-market investments carried atfair value Total nancial assets Long-term interest-bearing liabilities Current portion of long-term loans payable Other long-term non-interest bearing nancial liabilities Short-term borrowings Derivative and Other Financial liabilities Accounts payable Total nancial liabilities
29 63 4 111 37 9
156 708 708 29 156
29 63 4 111 37 165 708
29 60 4 111 37 165 708 5 110 824 195 124 26 2 352 3 521
4 220
821 195 124 10 2 352
5 113 821 195 124 26 2 352 3 518
16 16
3 502
Annual Report 2012
93
Carrying amounts Financial assets and liabilities at fair value through prot or loss Loans and receivables measured at amortized cost Financial liabilities measured at amortized cost
EURm
Current Non-current availableavailablefor-sale for-sale nancial nancial assets assets
Total carrying amounts
Fair value
2011 Available-for-sale investments1 Long-term loans receivable2 Accounts receivable Current portion of long-term loans receivable3 Derivatives and other current nancial assets Fixed income and money-market investments carried atfair value Total nancial assets Long-term interest-bearing liabilities Current portion of long-term loans payable Other long-term non-interest bearing nancial liabilities Short-term borrowings Derivative and Other Financial liabilities Accounts payable Total nancial liabilities
1
23 85 5 215 54 19
42 897 897 23 42
23 85 5 215 54 61 897
23 82 5 215 54 61 897 6 332 372 357 3 888 97 2 209 3 926
5 373
366 357 3 888 21 2 209
6 335 366 357 3 888 97 2 209 3 920
76 76
3 844
Includes investments in publicly quoted equity shares and investments carried at fair value of EUR 5 million and EUR 24 million, respectively in 2012 (EUR 1 million and EUR22 million in 2011). 2 Includes EUR 39 million (EUR 60 million in 2011) relating to customer nancing. 3 Includes EUR 35 million (EUR 54 million in 2011) relating to customer nancing.
The long-term loans receivable fair value is measured by amortizing the future cash ows of customer loans using the current credit risk factor (discount factor) of the borrower, whereas the carrying amount is based on the effective interest rate. The fair values of accounts receivable and accounts payable are assumed to approximate their carrying amounts due to their short-term nature. The fair values are estimated to be equal to the carrying amounts for short-term nancial assets and nancial liabilities due to the limited credit risk and short maturity. Fixed income and money-market investments include available-for-sale investments, liquid assets of EUR 2 million (EUR 13 million in 2011) and available-for-sale investments, cash equivalents of EUR 706 million (EUR 884 million in 2011). The fair value of long-term interest bearing liabilities is determined with reference to quoted yield curves. Derivative and other current nancial assets include EUR 156 million derivative assets (EUR 42 million in 2011). Derivative and other nancial liabilities include EUR 16 million derivative liabilities (EUR 76 million in 2011) and a non-derivative short-term nancial liability of EUR 8 million related to assets held temporarily by the Group due to a sale of receivable arrangement in China (EUR 21 million in 2011). The fair value of other nancial liabilities is assumed to approximate the carrying amount due to its short-term nature. For information on the valuation of items measured at fair value refer to Note 1, Accounting principles. Refer to Note 17, Derivative nancial instruments for the split of hedge accounted and non-hedge accounted derivatives.
94
Fair value hierarchy The following table presents the valuation methods used to determine the fair values of nancial instruments carried at fair value at December 31:
EURm
Instruments with quoted prices in active markets (Level 1)
Valuation technique using observable data (Level 2)
Valuation technique using non-observable data (Level 3)
Total
2012 Fixed income and money-market investments carried at fair value Investments at fair value through prot and loss Available-for-sale investments in publicly quoted equity shares Other available-for-sale investments carried at fair value Derivative assets Total nancial assets Derivative liabilities Total nancial liabilities
708 5 713
14 156 170 26 26
10 10
708 5 24 156 893 26 26
EURm
Instruments with quoted prices in active markets (Level 1)
Valuation technique using observable data (Level 2)
Valuation technique using non-observable data (Level 3)
Total
2011 Fixed income and money-market investments carried at fair value Investments at fair value through prot and loss Available-for-sale investments in publicly quoted equity shares Other available-for-sale investments carried at fair value Derivative assets Total nancial assets Derivative liabilities Total nancial liabilities
897 1 898
13 42 55 76 76
9 9
897 1 22 42 962 76 76
Level 1 includes nancial assets and liabilities that are measured in whole or signicant part by reference to published quotes in an active market. A nancial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arms length basis. This level includes listed bonds and other securities, listed shares and exchange traded derivatives. Level 2 includes nancial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These include assets and liabilities for which pricing is obtained via pricing services but where prices have not been determined in an active market, nancial assets with fair values based on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets that are valued using the Groups own valuation models in which the material assumptions are market observable. The majority of the Groups over-the-counter derivatives and certain other instruments not traded in active markets fall within this level. Level 3 valuation techniques using non-observable inputs mean that fair values are determined in whole or in part using a valuation technique based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. However, the fair value measurement objective remains the same, that is, to estimate an exit price from the Groups perspective. The main asset classes in this level are unlisted equity investments and unlisted funds.
Annual Report 2012
95
The following table reconciles the opening and closing balances of nancial instruments in Level 3:
Other available-for-sale investments carried at fair value
EURm
Balance at December 31, 2010 Purchases Other movements Balance at December 31, 2011 Purchases Balance at December 31, 2012
7 9 (7) 9 1 10
17 Derivative nancial instruments

Assets EURm Fair value1 Notional2 Liabilities Fair value1 Notional2
2012 Cash ow hedges: Forward foreign exchange contracts Derivatives not designated in hedge accounting relationships carried at fair value through protand loss: Forward foreign exchange contracts Currency options bought Currency options sold Interest rate swaps Total
40
(2)
1 111
143 12 1 156
Assets
4 400 503 150 5 093
(12) (2) (16)

Liabilities
1 545 54 150 2 860
EURm
Fair value1
Notional2
Fair value1
Notional2
2011 Cash ow hedges: Forward foreign exchange contracts Derivatives not designated in hedge accounting relationships carried at fair value through protand loss: Forward foreign exchange contracts Currency options bought Currency options sold Interest rate swaps Other derivatives Total
1 2
1 680
(15)
1 838
33 2 42
2 617 312 4 609
(57) (3) (1) (76)
2 752 136 150 4 876
The fair value of derivative nancial instruments is included as an asset in other nancial assets and as a liability in other nancial liabilities. Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk as the exposure of certain contracts may be offset by that of other contracts.
At December 31, 2012, the Forward foreign exchange contracts under Cash ow hedges exclude the impact of the classication change of the Forward foreign exchange contracts from qualifying cash ow hedges to non-qualifying cash ow hedges, and are included under Forward foreign exchange contracts in Derivatives not designated in hedge accounting relationships carried at fair value through prot and loss. Previously these were included under Forward foreign exchange contracts under Cash ow hedges. For comparability purposes, this reclassication was also made for 2011. There is no change in total derivative nancial instruments assets or liabilities as a result of the reclassication.
96
18Inventories
EURm 2012 2011
Raw materials and supplies Work in progress Finished goods Advances to suppliers Total
200 217 564 3 984
315 235 719 6 1 275
In 2012, the cost of inventories recognized as an expense and included in cost of sales was EUR 3 868 million (EUR 4 266 million in 2011 and EUR 4 007 million in 2010). Movements in allowances for excess and obsolete inventory:
EURm
2012
2011
2010
At January 1 Charged to income statement Deductions At December 31
223 142 (127) 238
225 105 (107) 223
272 75 (122) 225
Deductions include utilization and releases of the allowances. In 2012, deductions also include a reclassication to assets of disposal groups classied as held for sale of EUR 39 million (EUR 2 million in 2011). Refer to Note 31, Non-current assets and disposal groups classied as held for sale.
19 Prepaid expenses and accrued income

EURm 2012 2011
VAT Other taxes Deposits Prepaid pension costs Other prepaid expenses and accrued income Total
167 409 45 41 217 879
194 430 50 31 346 1 051
Other prepaid expenses and accrued income include various amounts which are individually insignicant.
20 Allowances for doubtful accounts

Movements in allowances for doubtful accounts:
EURm
2012
2011
2010
At January 1 Charged to income statement Deductions At December 31
110 46 (36) 120
159 43 (92) 110
154 70 (65) 159
Deductions include utilization and releases of the allowances. In 2011, deductions also included reclassications to assets of disposal groups classied as held for sale of EUR 2 million. Refer to Note 31, Non-current assets and disposal groups classied as held for sale.
Annual Report 2012
97
21 Currency translation differences

EURm Gross Tax Net
Balance at January 1, 2010 Exchange differences on translating foreign operations Attributable to non-controlling interests Balance at December 31, 2010 Exchange differences on translating foreign operations Attributable to non-controlling interests Balance at December 31, 2011 Exchange differences on translating foreign operations Attributable to non-controlling interests Balance at December 31, 2012
20 88 (15) 93 45 (7) 131 (2) (1) 128
2 3 5 5 5
22 91 (15) 98 45 (7) 136 (2) (1) 133
The tax relating to exchange differences on translating foreign operations is current tax.
22 Fair value and other reserves

Hedging reserve EURm Gross Tax Net Available-for-sale investments Gross Tax Net Gross Total Tax Net
Balance at January 1, 2010 Cash ow hedges: Net fair value (losses)/gains Transfer of losses to income statement as adjustment to net sales1 Transfer of gains to income statement as adjustment to cost of sales1 Balance at December 31, 2010 Cash ow hedges: Net fair value (losses)/gains Transfer of losses to income statement as adjustment to net sales1 Transfer of gains to income statement as adjustment to cost of sales1 Transfer of losses/(gains) as a basis adjustment to assets and liabilities2 Available-for-sale investments: Net fair value losses Balance at December 31, 2011 Cash ow hedges: Net fair value gains Transfer of losses to income statement as adjustment to net sales1 Transfer of gains to income statement as adjustment to cost of sales1 Balance at December 31, 2012
1 2
64 (129) 149 (119) (35) (24) 4 24 13 (18) 30 157 (93) 76
(17) 14 (3) 6 (3)
47 (115) 149 (119) (38) (18) 4 24 10 (18) 30 157 (93) 76
(1) (1) (1)
(1) (1) (1)
64 (129) 149 (119) (35) (24) 4 24 13 (1) (19) 30 157 (93) 75
(17) 14 (3) 6 (3)
47 (115) 149 (119) (38) (18) 4 24 10 (1) (19) 30 157 (93) 75
Deferred tax for the Groups foreign subsidiaries was not recognized at December 31, 2012, 2011 and 2010 due to valuation adjustments. Included in the initial acquisition consideration for the Motorola Solutions networks business. Refer to Note 8, Acquisitions and disposals.
98
In order to ensure that amounts deferred in the cash ow hedging reserve represent only the effective portion of gains and losses on properly designated hedges of future transactions that remain highly probable at the statement of nancial position date, the Group has adopted a process under which all derivative gains and losses are initially recognized in the consolidated income statement. The appropriate reserve balance is calculated at the end of each period and recorded in fair value and other reserves. The Group continuously reviews the underlying cash ows and the hedges allocated thereto, to ensure that the amounts transferred to fair value reserves during the year ended December 31, 2012, 2011 and 2010 do not include gains or losses on forward exchange contracts that have been designated to hedge forecasted sales or purchases that are no longer expected to occur. All the net fair value gains or losses recorded in fair value and other reserves at December 31, 2012 on open forward foreign exchange contracts, which hedge anticipated future foreign currency sales or purchases, are transferred from the hedging reserve to the consolidated income statement when the hedged items affect the income statement at various dates up to approximately 15 months from the statement of nancial position date.
23 Issued share capital and share premium

EURm 2012 2011 2010
Share capital Share premium Additional parent contribution Total Issued capital comprises: 100 073 fully paid ordinary shares 500 fully paid cumulative preference shares Additional parent contribution Total
0 9 726 18 9 744 7 194 2 532 18 9 744
0 9 726 18 9 744 7 194 2 532 18 9 744
0 8 726 18 8 744 7 194 1 532 18 8 744
Share capital
Ordinary share class
Number of shares
Par value EUR
Share capital EUR
Class A Class B Class C Class D
49 999 49 999 25 50 100 073
4 4 4 1
199 996 199 996 100 50 400 142
Cumulative preference share class
Number of shares
Par value EUR
Share capital EUR
Class CPA Class CPB Class CPC Class CPD
150 150 100 100 500
0.01 0.01 0.01 0.01
1.5 1.5 1.0 1.0 5
Annual Report 2012
99
Fully paid ordinary shares
EURm
Number of shares
Share capital
Share premium
Balance at January 1, 2010 Movement Balance at December 31, 2010 Movement Balance at December 31, 2011 Movement Balance at December 31, 2012
100 073 100 073 100 073 100 073
0 0 0 0
7 194 7 194 7 194 7 194
Each class A share, class B share and class C share confers the right to cast 400 votes and each class D share confers the right to cast 100 votes at the general meeting of Nokia Siemens Networks. Class D shares are not entitled to vote on the appointment, removal or suspension of managing directors. The class C and class D shares are not entitled to any balance in a share premium reserve. If dividends or other distributions are made, the shares shall give entitlement to such dividends and other distributions in accordance with the following ratio: Class A share 1 Class B share 1 Class C share 1/100th Class D share 4/100th However, no distributions to holders of class A shares, class B shares, class C shares and class D shares shall be made until the cumulative preference share premium, cumulative preference shares prot reserves and unrecognized cumulative preference dividends have been fully distributed to the holders of the cumulative preference shares A, B, C, and D. Fully paid cumulative preference shares
EURm
Number of shares
Share capital
Share premium
Balance at January 1, 2010 Movement Balance at December 31, 2010 Movement Balance at December 31, 2011 Movement Balance at December 31, 2012
0 300 300 200 500 500
0 0 0 0
1 532 1 532 1 000 2 532 2 532
Each cumulative preference share confers the right to cast one vote at the general meeting of Nokia Siemens Networks. Cumulative preference shareholders A and B are entitled to cumulative prot reserves A and B, which is cumulatively 10% of the share par value plus the share premium. As the cumulative preference share premium A and B and cumulative preference share prot reserves A and B were not fully distributed on July 1, 2012 the percentage increases annually on July 1 by 1% per year up to a maximum of 13%. Cumulative preference shareholders C and D are entitled to cumulative prot reserves C and D, which is cumulatively 12% of the share par value plus the share premium. If the cumulative preference share premium C and D and cumulative preference share prot reserves C and D have not been fully distributed on July 1, 2014 the percentage shall increase annually on July 1 by 1% per year up to a maximum of 15%. No distributions of cumulative prot reserves have been made at December 31, 2012. The total amount of cumulative preference share dividends not recognized at December 31, 2012 is EUR 576 million (EUR 267 million in 2011 and EUR 76 million in 2010). Distributions of any other reserves or distributions to ordinary shares shall not take place until the cumulative preference share premium, cumulative preference shares prot reserves and unrecognized cumulative preference share dividends have been fully distributed to the holders of the cumulative preference shares A, B, C and D. Legal reserve Nokia Siemens Networks B.V. has a legal reserve of EUR 66 million (EUR 68 million in 2011 and EUR 45 million in 2010) that is not available for distribution to its shareholders. The legal reserve consists of the portion of the cumulative share in the income of group companies of Nokia Siemens Networks B.V. which is restricted from distribution due to Dutch regulatory requirements. The legal reserves are included in the accumulated decit in the consolidated statement of nancial position.
24 Loans and borrowings

The following table presents the carrying amounts of the Groups long-term interest-bearing liabilities, current portion of long-term interestbearing liabilities and short-term borrowings at December 31 (refer to Note 34, Financial and capital risk management):
EURm
2012
2011
European Investment Bank: nal maturity January 20151 Nordic Investment Bank: nal maturity March 20151 Finnish pension loan: nal maturity October 2015 Firstrand Bank Limited: maturity March 2015 Forward Starting Credit Facility term loan: maturity March 2014 Other Long-term interest-bearing liabilities European Investment Bank Nordic Investment Bank Finnish pension loan Firstrand Bank Limited: maturity October 2012 Skandinaviska Enskilda Banken: nal maturity June 2012 Other Current portion of long-term interest-bearing liabilities Revolving credit facility Commercial Paper Borrowings on committed and uncommitted basis Other Short-term borrowings Total loans and borrowings
1 The proceeds of the loan are used to nance investments in research and development in Radio Access Network technology.
50 35 88 44 600 4 821 100 45 44 6 195 82 3 39 124 1 140
150 80 132 4 366 100 44 91 115 7 357 613 148 89 38 888 1 611
In 2011, the Group entered into a forward starting credit facility (FSCF) with major international banks with an available commitment of EUR1500 million effective from the forward start date of June 1, 2012. This facility replaced the matured EUR 2 000 million revolving credit facility from 2009. The forward starting credit facility comprises two parts, a revolving credit facility maturing in June 2015 and a term loan facility that matures in June 2013. In December 2012, the Group made a EUR 150 million repayment of the term loan and agreed on a restated EUR 1 350 million forward starting credit facility with the lenders which extended the maturity of the remaining EUR 600 million term loan to March 2014. The forward starting credit facility is used for general corporate purposes and includes nancial covenants relating to nancial leverage and interest coverage of the Group. Nokia Siemens Networks B.V. and Nokia Siemens Networks Oy act as the Guarantors for the facility. At December 31, 2012 EUR 600 million term loan was outstanding (EUR 613 million was drawn under the EUR 2 000 million revolving credit facility at December 31, 2011) and is included in long-term interest-bearing liabilities. At December 31, 2012 all nancial covenants are satised. Nokia Siemens Networks B.V. acts as the Guarantor for the Finnish pension loan guarantee facility and the EUR 500 million commercial paper program in Finland. Nokia Siemens Networks B.V. and Nokia Siemens Networks Oy act as the Guarantors for the European Investment Bank and the Nordic Investment Bank loans. The European Investment Bank and the Nordic Investment Bank loans and the Finnish pension loan guarantee facility include similar covenants to the restated forward starting credit facility. All the nancial covenants are satised at December 31, 2012. The Groups credit facilities are subject to nancial covenants and cross default provisions and the Group is in compliance with these at December 31, 2012. Management believes there is sufcient headroom with respect to the covenants to meet the Groups liquidity needs.
25 Share-based payment
The Group established a share-based incentive program in 2012 under which options are granted to selected employees. The options become exercisable on the fourth anniversary of the grant date or, if earlier, on the occurrence of certain corporate transactions such as an initial public offering (IPO). The exercise price of the options is based on a per share value on grant as determined for the purposes of the incentive program. The options will be cash-settled at exercise unless an IPO has taken place, at which point they would be converted into equity-settled options. If the
Annual Report 2012
101
awards are cash-settled, the holder will be entitled to half of the share appreciation based on the exercise price and the estimated value of shares on that date. If an IPO has not taken place by the sixth anniversary of the grant date, the Group will cash out any remaining options. If an IPO has taken place, equity options remain exercisable until the tenth anniversary of the grant date. The gains that may be made under the plan are also subject to a cap. The options are accounted for as a cash-settled share-based payment liability based on the circumstances at December 31, 2012. The fair value of the liability is determined based on the reporting date estimated value of shares less the exercise price of the options. For the purpose of estimating the share-based payment expense, it is assumed that the cash-settled options would be exercised immediately by participants upon vesting four years after the grant date. The total carrying amount for liabilities arising from share-based payment transactions is EUR 11 million at December 31, 2012 and is accrued in salaries and wages (refer to Note 27, Accrued expenses) in the consolidated statement of nancial position. Refer to Note 5, Employee benets expense, for the share-based payment expense recognized in the consolidated income statement. In the event that an IPO does occur, the share-based payment expense related to the equity-settled options will be measured based on the original grant date fair value.
26 Deferred taxes
EURm 2012 2011
Deferred tax assets: Inter-company prot in inventory Tax losses carried forward Non-current assets1 Current assets, current liabilities and other provisions Pension Other temporary differences Reclassication due to netting of deferred taxes on company level Total deferred tax assets Deferred tax liabilities: Undistributed earnings Non-current assets1 Current assets, current liabilities and other provisions Other temporary differences Reclassication due to netting of deferred taxes on company level Total deferred tax liabilities Net deferred tax asset Tax (charged)/credited to other comprehensive income at end of year
1
58 69 81 320 215 28 (301) 470 (20) (39) (262) (9) 301 (29) 441
51 154 108 320 223 26 (295) 587 (20) (58) (245) (4) 295 (32) 555
Non-current assets include purchase price accounting related amortization of intangible assets.
At December 31, 2012 the Group has loss carry forwards primarily attributable to foreign subsidiaries of EUR 3 051 million (EUR 1 220 million in 2011), of which EUR 1 698 million (EUR 47 million in 2011) will expire within ten years. At December 31, 2012 the Group has loss carry forwards and temporary differences of EUR 6 253 million (EUR 4 151 million in 2011) and EUR 237 million of tax credits (EUR 122 million in 2011) for which no deferred tax assets were recognized in the consolidated nancial statements due to a history of recent losses in certain jurisdictions. The unrecognized deferred tax assets relate primarily to Finland and Germany. The amount of temporary differences for which no deferred tax assets were recognized was EUR 3 482 million (EUR 3 805 million in 2011) and the amount of loss carry forwards for which no deferred tax assets were recognized was EUR 2 771 million (EUR 346 million in 2011). EUR 1 548 million of these loss carry forwards (EUR 16 million in 2011) will expire within ten years and EUR 1 223 million (EUR 330 million in 2011) of these loss carry forwards have no expiry date. Tax credits for which no deferred tax assets were recognized expire within ve years. The recognition of the remaining deferred tax assets is supported by offsetting deferred tax liabilities, earnings history and prot projections in the relevant jurisdictions. At December 31, 2012 the Group has undistributed earnings of EUR 347 million (EUR 424 million in 2011) for which no deferred tax liability was recognized as these earnings are considered to be permanent investments.
102
27 Accrued expenses
EURm 2012 2011
Advance payments Salaries and wages Billings in excess of costs incurred1 Social security VAT Other taxes Other Total
1
1 080 746 216 151 111 192 688 3 184
919 561 260 160 126 234 725 2 985
Refer to Note 4, Revenue recognition.
Other accrued expenses include EUR 370 million (EUR 382 million in 2011) related to customer projects, EUR 90 million (EUR 94 million in 2011) related to research and development expenses as well as various other amounts which are individually insignicant. Accrued holiday pay is included in salaries and wages in 2012 and has been reclassied from social security for comparability purposes in 2011. There is no change in total accrued expenses as a result of the reclassication.
28Provisions
EURm Warranty and Retrot Tax Restructuring Project losses Other Total
At January 1, 2011 Charged/(credited) to income statement: Additional provisions Changes in estimates Acquisitions Reclassication1 Utilized during year Translation differences At December 31, 2011 Charged/(credited) to income statement: Additional provisions Changes in estimates Reclassication1 Utilized during year Translation differences At December 31, 2012
1
72 60 (33) 30 (3) (32) 94 49 (28) (2) (41) 72
90 57 (41) (1) 105 36 (30) (24) 87
144 74 (38) (94) 86 977 (48) (447) 568
207 237 (70) (112) (169) 93 248 (65) (4) (128) 144
126 216 (113) 5 (1) (67) (3) 163 48 (25) 17 (48) (7) 148
639 644 (295) 35 (116) (363) (3) 541 1 358 (196) 11 (688) (7) 1 019
In 2012, the reclassication of other provisions consists of EUR 26 million from accrued expenses for contractual commitments with vendors, and EUR 9 million to accounts payable due to a settlement agreement. All other reclassications relate to divestments (refer to Note 31, Non-current assets and disposal groups classied as held for sale).
Annual Report 2012
103
EURm
2012
2011
Analysis of total provisions at December 31: Non-current Current Total
303 716 1 019
106 435 541
Warranty provisions relate to products sold. The Groups policy for estimating warranty provisions is disclosed in Note 1, Accounting principles. Outows of warranty provisions are generally expected to occur within the next 18 months. Tax provisions include corporate income tax, VAT and other taxes. The timing of outows related to tax provisions is inherently uncertain. In 2012, the restructuring provision includes personnel and other restructuring related costs, such as real estate exit costs. Previously, the restructuring provision was based on personnel costs only and any other restructuring costs were provided for in other provisions. For comparability purposes, this reclassication was made for 2011. There is no change in total provisions as a result of the reclassication. The majority of outows of restructuring provisions are expected to occur over the next two years. Provisions for project losses relate to onerous contracts. The Groups policy for providing for onerous contracts is disclosed in Note 1, Accounting principles. Utilization of provisions for project losses is generally expected to occur over the next 12 months. Other provisions include provisions for various contractual obligations, of which EUR 35 million relates to contractual commitments with vendors, and provisions of EUR 18 million for infringement of intellectual property rights. Outows are generally expected to occur over the next two years.
29 Commitments and contingencies

EURm 2012 2011
Collateral for the Groups commitments Assets pledged Contingent liabilities on behalf of Group companies Other guarantees Contingent liabilities on behalf of other companies Other guarantees Financing commitments Customer nance commitments1 Venture fund commitments
1
2 864 11 34 9
2 1 191 86
Refer to Note 34, Financial and capital risk management.
The amounts above represent the maximum principal amount of commitments and contingencies. At December 31, 2012 other guarantees on behalf of Group companies include commercial guarantees of EUR 598 million (EUR 997 million in 2011) provided to certain customers of the Group in the form of bank guarantees or corporate guarantees issued by some of the Groups entities. These instruments entitle the customer to claim payment as compensation for non-performance by the Group of its obligations under network infrastructure supply agreements. Depending on the nature of the guarantee, compensation is payable on demand or subject to verication of non-performance. The volume of other guarantees has decreased by EUR 327 million mainly due to expired guarantees. Other guarantees on behalf of other companies represent commercial guarantees issued on behalf of third parties. The increase in volume is mainly due to the transfer of guarantees in connection with the disposal of certain businesses where contractual risks and revenues have been transferred, but some of the commercial guarantees have not yet been re-assigned legally. Financing commitments are available under loan facilities negotiated mainly with the Groups customers. Availability of the amounts is dependent upon the borrowers continuing compliance with stated nancial and operational covenants and compliance with other administrative terms of the facility. The loan facilities are primarily available to fund capital expenditure relating to purchases of network infrastructure equipment and services.
104
Venture fund commitments are nancing commitments to a fund making initial capital investments in start-up companies. As a limited partner in the fund, the Group is committed to make capital contributions and entitled to cash distributions according to the respective partnership agreements. The Group is party to routine litigation incidental to the normal conduct of business. In the opinion of management, the outcome of such litigation is not likely to be material to the nancial condition or result of operations. At December 31, 2012 the Group has purchase commitments of EUR 799 million (EUR 529 million in 2011) relating to commitments from service agreements, outsourcing arrangements and inventory purchase obligations, primarily for purchases in 2013 through 2014.
30 Leasing contracts
The Group leases ofce, manufacturing and warehouse space under various non-cancellable operating leases. Certain contracts contain renewal options for various periods of time. The future costs for non-cancellable leasing contracts are as follows:
EURm
Operating leases
Leasing payments
2013 2014 2015 2016 2017 Thereafter Total
141 97 69 40 25 102 474
Rental expenses amount to EUR 309 million in 2012 (EUR 261 million in 2011 and EUR 255 million in 2010), including restructuring charges of EUR 59 million in 2012 (EUR 2 million in 2011 and EUR 14 million in 2010).
31 Non-current assets and disposal groups classied as held for sale

On December 1, 2012 the Group entered into an agreement to sell its Optical Networks business to Marlin Equity Partners. The proposed transaction involves the complete Optical Networks product portfolio, services offering and existing customer contracts. The transaction is expected to close in the rst half of 2013 and managements best estimate of the loss to be recognized, following the derecognition of assets and liabilities transferred, amounts to EUR 130 million. On December 5, 2012 the Group signed an agreement to sell its business support systems (BSS) business, including the billing and charging software products and solutions and related services, to Redknee Solutions Inc. The transaction is anticipated to close in the rst half of 2013. These divestments further enhance the Groups strategic focus on the mobile broadband business. The assets and liabilities included in the disposal groups classied as held for sale at December 31 were as follows:
EURm
2012
Non-current assets Property, plant and equipment Current assets Inventories Accounts receivable, net of allowances for doubtful accounts Prepaid expenses and accrued income Assets of disposal groups classied as held for sale Current liabilities Accrued expenses Provisions Liabilities of disposal groups classied as held for sale
9 91 39 4 143 84 6 90
Annual Report 2012
105
The result of discontinued operations, involving the Optical Networks business, and the result recognized on the re-measurement of the disposal group to fair value less costs to sell, are as follows for the years ended December 31:
EURm
2012
2011
2010
Net sales Cost of sales Gross prot Research and development expenses Selling and marketing expenses Administrative and general expenses Other expenses Loss before tax for discontinued operations Income tax expense Loss for the year from discontinued operations
407 (283) 124 (110) (28) (20) (24) (58) (5) (63)
396 (302) 94 (130) (28) (18) (82) (5) (87)
455 (325) 130 (136) (28) (18) (52) (6) (58)
In order to determine the results for the discontinued operations, revenues and costs have been allocated to the business only to the extent that the Group will no longer be entitled to revenues or incur expenses once the business is disposed of. Net cash ows from discontinued operations are as follows for the years ended December 31:
EURm
2012
2011
2010
Operating cash ow Investing cash ow Financing cash ow Total cash ow
(28) (12) (40)
(84) (15) (99)
(55) (20) (75)
The nancing of the Group is managed on a centralized basis and as such, there are no nancing cash ows associated with discontinued operations. 2011 In 2011, the Group started to implement a strategy to rationalize its business and divest of certain non-core assets. In connection with this strategy, at December 31, 2011 the Group had entered into disposal agreements or was actively negotiating the sale of certain of its operations. At December 31, 2011 the Group had assets and liabilities included in several disposal groups classied as held for sale. Impairment charges totaling EUR 19 million were recognized as a result of measuring these disposal groups at fair value less costs to sell. Certain of these transactions included contractual provisions that required cash payment by the Group on closing, and possible additional subsequent payments to be made based on potential employee redundancies within the disposal group. Refer to Note 8, Acquisitions and disposals.Assets and liabilities included in disposal groups classied as held for sale at December 31 were as follows:
EURm
2011
Property, plant and equipment Inventories Accounts receivable, net of allowances for doubtful accounts Prepaid expenses and accrued income Assets of disposal groups classied as held for sale Provisions Other long-term liabilities Accounts payable Accrued expenses Liabilities of disposal groups classied as held for sale
2 31 22 2 57 116 6 17 22 161
106
During 2011, due to the changes in the business environment in Egypt, the property in the 6th of October City was reclassied from held for sale to property, plant and equipment. There was no effect on the income statement as a result of the reclassication. The property in China was sold during 2011 with a gain of EUR 9 million.
32 Related party transactions

Nokia and Siemens contributed to Nokia Siemens Networks certain tangible and intangible assets and certain business interests that comprised Nokias networks business and Siemens carrier-related operations. Nokia and Siemens each own approximately 50% of Nokia Siemens Networks. Nokia has the ability to appoint the Chief Executive Ofcer of the Group and the majority of the members of the Board of Directors. Accordingly, Nokia is deemed to have control and thus consolidates the results of Nokia Siemens Networks in its nancial statements. Siemens accounts for its ownership using the equity method of accounting. Transactions with the Groups shareholders The Group has a number of contracts with its shareholders, Nokia and Siemens, and their subsidiary companies. Sales transactions with the parent companies mainly relate to historical contracts agreed by the parent companies prior to the formation of the Group, where the Group now has an obligation to deliver products or services to fulll these agreements. The amounts outstanding are unsecured and will be settled in cash. There have been no guarantees provided or received for any related party receivables or payables. In China, the Group owes accounts payable of approximately EUR 180 million to Nokia. These accounts payable relate to the networks business before that business was transferred by Nokia to the Group upon its formation in 2007 and consist of customer receivables collected by the Group on behalf of Nokia. Management believes that the Group will be asked to repay this payable in the near future. No expense has been recognized in the period for bad or doubtful debts in respect of the amounts owed by the related parties (EUR 1 million in 2011 and EUR 0 million in 2010). At December 31, 2012 EUR 1 million (EUR 1 million in 2011) of the valuation allowance for doubtful accounts relates to amounts owed by various Siemens entities. During 2012, the Group incurred expenses of EUR 239 million (EUR 386 million in 2011 and EUR 508 million in 2010) receiving products and services from both shareholders relating to information technology (IT) infrastructure, shared services, leases and software development. In December 2010, the Group sold a building, situated in Karaportti 8, Espoo, Finland to Nokia for EUR 27 million. The Group then entered into an operating lease with Nokia to lease the building for 15 years. The Groups transactions with its shareholders are summarized in the following table:
Loan or nance liability balances outstanding to shareholders 2012 2011
Sales of goods or services EURm 2012 2011 2010
Purchases of goods or services 2012 2011 2010
Amounts owed by related parties 2012 2011
Amounts owed to related parties 2012 2011
Nokia Siemens
5 20
6 23
1 46
93 146
161 225
168 340
34 10
29 7
227 26
242 19
7 32
6 32
The deposits and loans with Nokia are described in the following tables:
Amount of loan in the agreement currency
2012 Description of loans or other nance receivables and liabilities
Original term
Interest rate at December 31
Balance at December 31
Short-term deposit from Nokia Siemens Networks to Nokia in Venezuela Short-term loans from Nokia to Nokia Siemens Networks Finance B.V.
VEF 49 million EUR 7 million

Amount of loan in the agreement currency
52 days 7 days
1.00% 0.02%
EUR 7 million EUR 7 million
2011 Description of loans or other nance receivables and liabilities
Original term
Interest rate at December 31
Balance at December 31
Short-term deposit from Nokia Siemens Networks to Nokia in Venezuela Short-term loans from Nokia to Nokia Siemens Networks Finance B.V.
VEF 42 million EUR 6 million
123 days 7 days
2.00% 0.71%
EUR 6 million EUR 6 million
Annual Report 2012
107
The Group maintains offsetting deposits at Nokia as long as loans from Nokia are outstanding. At December 31, 2012 the interest-free loan from Siemens granted to the Group to bridge nance for certain payments withheld by a customer was EUR 32 million (EUR 32 million in 2011). The parent companies have provided a committed overdraft facility of EUR 100 million which has not been utilized at December 31, 2012. The overdraft facility can be cancelled by the parent companies at one months notice. No commitment fees are paid on this facility. In September 2011, the Group received a capital injection of EUR 1 000 million from its parent companies (refer to Note 23, Issued share capital and share premium). At December 31, 2012 the Group has deferred contracts with Siemens. These contracts require invoicing to be done by Siemens as the party with which the original transaction had been contracted, but the risks and revenues related to fullling the contractual requirements remained with the Group when these contracts transferred to the Group after April 1, 2007. The receivables associated with these deferred contracts with Siemens are included in the above amounts owed by related parties. Lease transactions with the Groups shareholders The Group has multiple operating leases with both Nokia and Siemens. These operating leases mainly relate to property and typically have a lease term of ve years or longer. The Group leases this property from Nokia and Siemens to support its network operations around the world. Total lease expenses paid in 2012 to Nokia and Siemens are EUR 10 million (EUR 19 million in 2011 and EUR 21 million in 2010) and EUR 29 million (EUR 32 million in 2011 and EUR 41 million in 2010) respectively.
EURm
Nokia
Siemens
Leasing payments
2013 2014 2015 2016 2017 Thereafter Total
6 5 5 5 3 21 45
24 19 14 7 6 70
Transactions and positions with associates

EURm 2012 2011 2010
Share of results of associates Share of other comprehensive income/(loss) of associates Share of shareholders equity of associates Sales to associates Purchases from associates Receivables from associates Liabilities to associates
8 4 28 8 147 32
(17) (2) 19 29 43 13
11 40 15 148 3 8
Board of Directors The members of the Board of Directors are appointed by the parent companies of the Group. The appointed board members are employees of the parent companies, except for the Chairman of the Board. No other board members, except the Chairman, receive remuneration or retirement benets from the Group for the services they provide as members of the Board of Directors. There were no loans granted to the members of the Board of Directors at December 31, 2012.
108
Management compensation The remuneration of the Nokia Siemens Networks senior management team and the Chairman of the Board of Directors during the period was as follows:
EURm
2012
2011
2010
Short-term employee benets Post-employment benets Other long-term benets Termination benets Share-based payment expense Total
20.5 1.0 1.3 4.0 26.8
9.4 0.7 5.2 0.6 (0.1) 15.8
7.6 0.5 4.8 (0.1) 12.8
The number of executive board members ranged from 13 to 15 members during the year (13 to 14 members in 2011 and 12 to 14 members in2010). The amounts presented above include remuneration to the executive board members only for the time they were on the Executive Board. In addition to the executive board members, the remuneration to the Chairman of the Board of Directors is included in the amounts presented above since October 2011. There were no loans granted to the members of the Group Executive Board at December 31, 2012.
33 Notes to the consolidated statement of cash ows

EURm 2012 2011 2010
Other adjustments for: Scrapping/write-off of property, plant and equipment/intangible assets Share of results of associates Impairment charges (Note 9) Share-based payment expense/(income) Post-employment benets (Note 6) Other (income)/expenses Other adjustments, total
9 (8) 37 11 40 (2) 87
7 17 19 (2) 43 2 86
7 (11) 2 (5) 45 6 44
The cash outows for restructuring and other specic items, excluding impairments and PPA related charges, are EUR 645 million in 2012 (EUR 188 million in 2011 and EUR 510 million in 2010).
Annual Report 2012
109
34 Financial and capital risk management

Risk management at the Group is a systematic and proactive way to analyze, review and manage all opportunities, threats and risks related to the Groups objectives rather than solely to eliminate risks. The Groups Treasury function focuses on nancial risks. The Groups nancial risk management objective is to guarantee cost-efcient funding at all times and to identify, evaluate and hedge nancial risks and optimize cash management processes. There is a strong focus in the Group on protecting shareholder value. Treasury activities support this aim by (1) minimizing the adverse effects caused by uctuations in the nancial markets on the protability of the underlying business, and (2) managing the capital structure of the Group by balancing prudently the levels of liquid assets and nancial borrowings. Treasury activities are governed by policies approved by the Board of Directors. Treasury policy provides principles for overall nancial risk management and determines the allocation of responsibilities for nancial risk management in the Group. Operating procedures cover specic areas such as foreign exchange risk, interest rate risk, use of derivative nancial instruments, as well as liquidity and credit risk. The Group is risk averse in its treasury activities. (a) Market risk Foreign exchange risk The objective of the foreign exchange (FX) risk management activities is to support the Group in protecting shareholder value by minimizing the effects of uncertainty in the international foreign exchange markets. The main principle is that all major foreign exchange exposures are identied, analyzed and hedged by the Groups treasury function. Specically: Statement of nancial position risks from foreign exchange positions in currencies other than the functional currency of the respective Group entity are identied and hedged on an ongoing basis. Cash ow risks arising from highly probable forecasted sales and purchases of the Group are identied on a monthly basis and hedged under hedge accounting for a period of up to 15 months. These forecasted sales and purchases are typically realized within an equivalent period. Other forecasted cash ow risks are managed selectively and the related hedges are carried at fair value through prot and loss. The Group has some exposure due to unhedged risks which consists of exposures in currencies that either cannot be hedged or which are considered immaterial. In 2012, these currencies represent approximately 2% of the Groups net sales (less than 2% of net sales in 2011). Exposures are mainly hedged with derivative nancial instruments such as forward foreign exchange contracts and foreign exchange options. The majority of nancial instruments hedging foreign exchange risk has a duration of less than a year. The Group does not hedge forecasted foreign currency cash ows beyond two years. Since the Group has entities where the functional currency is other than euro, the shareholders equity is exposed to uctuations in exchange rates. Equity changes caused by movements in foreign exchange rates are shown as a currency translation difference in the Groups consolidated nancial statements. The Group may use, from time to time, foreign exchange contracts and foreign currency denominated loans to hedge its equity exposure arising from foreign net investments. The Group has entities in Venezuela and Belarus where the functional currency is the currency of a hyperinationary economy. The Group assessed the entities nancial statements in accordance with IAS 29, Financial Reporting in Hyperinationary Economies. The impact is not material in 2012 or 2011. In 2010, the Group recorded an expense of EUR 14 million, mainly affected through an increase in nancial income and expenses, as a result of the Groups hyperinationary accounting assessment for its entity in Venezuela. Hyperinationary accounting did not have a material impact on the statement of nancial position in 2012 or 2011. Trading in hyperinationary economies carries a risk of future devaluation of monetary assets and liabilities. This risk cannot be hedged. The Group has foreign exchange exposure in Iran which cannot be hedged. Iran does not have a hyperinationary economy but it is impacted by international sanctions, foreign currency access is limited, and several exchange rates are available. The Group has therefore elected to use a rate at which the future cash ows represented by the transaction or balance could have been settled if those cash ows had occurred at the measurement date. The Group recognized a foreign exchange loss of EUR 109 million due to foreign exchange uctuations in the Iranian rial in 2012.
110
The tables below present the currencies that represent a signicant portion of the currency mix in outstanding nancial instruments at December 31:
2012 EURm
USD
JPY
CNY
INR
Other
FX derivatives used as cash ow hedges (absolute net amount)1 FX exposure from statement of nancial position items (absolute net amount)2, 3 FX derivatives not designated in a hedge relationship and carried at fair value throughprot and loss (absolute net amount)2, 3
2011 EURm
479 1 030 1 155
462 128 185
178 171
133 68
142 817 618
USD
JPY
KRW
ZAR
Other
FX derivatives used as cash ow hedges (absolute net amount)1 FX exposure from statement of nancial position items (absolute net amount)2, 3 FX derivatives not designated in a hedge relationship and carried at fair value throughprot and loss (absolute net amount)2, 3
1
141 496 469
467 161 396
147 126
146 156
133 928 796
The foreign exchange derivatives are used to hedge the foreign exchange risk from forecasted highly probable cash ows related to sales, purchases and business acquisition activities. In some of the currencies, especially US dollars (USD) and Japanese yen (JPY), the Group has substantial foreign exchange risks in both estimated cash inows and outows, which have been netted in the table. Refer to Note 22, Fair value and other reserves for more details on hedge accounting. The underlying exposures for which these hedges are entered into are not presented in the table as they are not nancial instruments as dened under IFRS 7, Financial Instruments: Disclosures. 2 The statement of nancial position items and some probable forecasted cash ows which are denominated in foreign currencies are hedged by a portion of foreign exchange derivatives not designated in a hedge relationship and carried at fair value through prot and loss. 3 The Group has hedged the statement of nancial position exposure with a combination of foreign exchange forwards and foreign exchange options.
Interest rate risk The Group is exposed to interest rate risk either through market value uctuations of statement of nancial position items (i.e. price risk) or through changes in interest income or expenses. Interest rate risk mainly arises through interest-bearing assets and liabilities. Estimated future changes in cash ows and statement of nancial position structure also expose the Group to interest rate risk. The objective of interest rate risk management is to support the Group in protecting its shareholder value by optimizing the balance between minimizing uncertainties caused by uctuations in interest rates and minimizing the consolidated net interest expense. The interest rate exposure of the Group is monitored and managed centrally by the Groups treasury function. Due to the Groups current statement of nancial position structure, the primary emphasis is placed on managing the interest rate risk of debt. At December 31, the interest rate prole of the Groups interest-bearing assets and liabilities is presented in the table below:
2012 EURm Fixed rate Floating rate 2011 Fixed rate Floating rate
Assets1 Liabilities2 Assets and liabilities before derivatives Interest rate derivatives Assets and liabilities after derivatives
1
405 (293) 112 (1) 111
2 121 (812) 1 309 1 309
375 (1 128) (753) (152) (905)
1 397 (444) 953 150 1 103
The increase in oating rate assets is primarily due to an increase in bank and cash. In 2012 and 2011, xed rate assets mainly include available-for-sale investments, cash equivalents, long-term loans receivable and short-term loans. 2 The increase in oating rate liabilities is primarily due to an increase in long-term loans from nancial institutions. The decrease in xed rate liabilities is mainly due to a decrease in short-term and long-term loans from nancial institutions.
Annual Report 2012
111
Value-at-Risk The Group uses the Value-at-Risk (VaR) methodology to assess the Groups exposures to foreign exchange and interest rate risks. The VaR based methodology provides estimates of potential fair value losses in market risk sensitive instruments as a result of adverse changes in specied market factors, at a specied condence level over a dened holding period. For the Group, the foreign exchange VaR is calculated using the Monte Carlo method which simulates random values for exchange rates in which the Group has exposures and it takes the nonlinear price function of certain foreign exchange derivative instruments into account. The variance-covariance methodology is used to assess and measure the interest rate risk. The VaR is determined using volatilities and correlations of rates and prices estimated from a one-year sample of historical market data, at a 95% condence level, using a one-month holding period. To put more weight on recent market conditions, an exponentially weighted moving average is performed on the data with an appropriate decay factor. This model implies that within a one-month holding period, the potential loss will not exceed the VaR estimate in 95% of possible outcomes. In the remaining 5% of possible outcomes, the potential loss will be at minimum equal to the VaR gure and on average, substantially higher. The VaR methodology relies on a number of assumptions such as: (1) risks are measured under average market conditions, assuming the market risk factors follow normal distributions; (2) future movements in market risk factors follow estimated historical movements; and (3) the assessed exposures do not change during the holding period. Thus, it is possible that for any given month, the potential losses at 95% condence level are different and could be substantially higher than the estimated VaR. Foreign exchange Value-at-Risk The VaR gures for the Groups nancial instruments which are sensitive to foreign exchange uctuations are presented in the table below. As dened in IFRS 7, Financial Instruments: Disclosures, the nancial instruments included in the VaR calculations are: (1) foreign exchange exposures from outstanding statement of nancial position items and other foreign exchange derivatives carried at fair value through prot and loss which are not in a hedge relationship and are mostly used for hedging statement of nancial position items; and (2) foreign exchange derivatives designated as forecasted cash ow hedges. Most of the VaR is caused by these derivatives as forecasted cash ow exposures are not nancial instruments as dened in IFRS 7 and thus not included in the VaR calculation. Foreign exchange Value-at-Risk:
EURm
2012
2011
At December 31 Average for the year Range for the year
42 46 27-60
13 29 13-52
Interest rate Value-at-Risk Interest rate VaR is calculated using the variance-covariance method to assess and measure interest rate risk. The VaR gures for the Groups interest rate exposure in the debt portfolio are presented in the table below. Sensitivities to credit spreads are not reected in the gures below. Interest rate Value-at-Risk:
EURm
2012
2011
At December 31 Average for the year Range for the year
0-1
1 4 1-6
(b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in nancial loss to the Group. Credit risk arises from bank and cash, xed income and money-market investments, derivative nancial instruments, loans receivable and credit exposures to customers, including outstanding receivables, nancial guarantees and committed transactions. Credit risk is managed separately for business related exposure and nancial credit exposure. Except for loan commitments given but not used of EUR 34 million in 2012 (EUR 86 million in 2011), the maximum exposure to credit risk is limited to the book value of the nancial assets included in the Groups consolidated statement of nancial position.
112
Business related credit risk The Group aims to ensure the highest possible quality in accounts receivable and loans due from customers. The credit policy sets out the framework for the management of the business related credit risks in all Group companies and afliates. Credit exposure is measured as the total of accounts receivable and loans due from customers and committed credits. At December 31, 2012 accounts receivable excluding allowances for doubtful accounts are EUR 4 231 million. At December 31, 2011 accounts receivable, excluding allowances for doubtful accounts as well as amounts expected to be uncollectible for acquired receivables, amounted to EUR 5 436 million. Loans receivable are EUR 74 million (EUR 115 million in 2011). The credit policy requires credit decisions to be based on credit evaluation including credit rating for larger exposures. The Groups rating policy denes the rating principles, and ratings are approved by the rating committee. Credit risks are approved and monitored according to the credit policy. Concentrations of customer or country risks are monitored at Group level. When appropriate, assumed credit risks are mitigated with the use of approved instruments, such as letters of credit, collateral or insurance and sale of receivables. Accounts receivable do not include any major concentrations of credit risk by customer. The top three customers account for approximately 9.1%, 4.3% and 2.4% (4.4%, 2.5% and 2.5% in 2011) of the Group accounts receivable and loans receivable at December 31, 2012. The top three credit exposures by country amount to 11.7%, 11.0% and 7.0% (13.3%, 6.2% and 5.6% in 2011). The Group considers the political, economic and regulatory environment with respect to such concentrations when assessing and managing credit risk. The Group has provided allowances for doubtful accounts as needed on accounts receivable and loans receivable based on an analysis of its customers credit quality and credit history. The Group establishes an allowance for doubtful accounts that represents an estimate of expected losses at the end of the period. All receivables and loans receivable are considered on an individual basis to determine the allowance for doubtful accounts. The overall portfolio of the customer accounts receivable includes trade receivables of EUR 2 948 million (EUR 3 642 million in 2011) and accrued receivables based on the percentage of completion method of accounting of EUR 1 164 million (EUR 1 573 million in 2011). The Group concluded that the carrying amount of trade receivables that does not create any additional credit risk exposure amounts to EUR 1 562 million at December 31, 2012 (EUR 1 958 million in 2011), as all the contractual cash ows are expected to be recoverable. Of these receivables, the aggregate value of receivables performing in accordance with the contractual payment terms is EUR 1 463 million (EUR 1 814 million in 2011), while the aggregate value of past due receivables is EUR 100 million (EUR 144 million in 2011). The aging of these past due receivables is as follows:
EURm
2012
2011
Past due 1-30 days Past due 31-180 days More than 180 days Total
45 32 23 100
55 60 29 144
At December 31, 2012 the gross carrying amount of accounts receivable, related to customer balances for which valuation allowances have been recognized, is EUR 1 505 million (EUR 1 905 million in 2011). The valuation allowances for these accounts receivable are EUR 120 million (EUR 110 million in 2011) and the amounts expected to be uncollectible for acquired receivables are EUR 16 million (EUR 111 million in 2011). Refer to Note 8, Acquisitions and disposals and Note 20, Allowances for doubtful accounts. At December 31, 2012 and 2011 there are no valuation allowances recognized for customer loans. There are no past due customer loans at December 31, 2012 (EUR 1 million in 2011, which was paid in January 2012). At December 31, 2012 and 2011, all accounts receivable under sale of receivables transactions have qualied for asset derecognition. Financial credit risk Financial instruments contain an element of risk of loss resulting from counterparties being unable to meet their obligations. This risk is monitored and managed centrally. The Group minimizes nancial credit risk by limiting its counterparties to a sufcient number of major banks and nancial institutions. In addition, the Group also monitors the total potential nancial losses, should its counterparties be unable to fulll their obligations on the open derivative contracts the Group has maintained with them on an ongoing basis.
Annual Report 2012
113
(c) Liquidity risk Liquidity risk is dened as nancial distress or extraordinary high nancing costs arising due to a shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and require nancing. Transactional liquidity risk is dened as the risk of executing a nancial transaction below fair market value, or not being able to execute the transaction at all within a specic period of time. The objective of liquidity risk management is to maintain sufcient liquidity and to ensure that it is available fast enough without endangering its value, in order to avoid uncertainty related to nancial distress at all times. The Group ensures a sufcient liquidity at all times by efcient cash management and by keeping sufcient committed and uncommitted credit lines available. In September 2011, the Group received a capital injection of EUR 1 000 million from its parent companies to further strengthen the Groups nancial position and support strategic exibility, productivity and innovation in areas such as mobile broadband and related services. Refer to Note 23, Issued share capital and share premium. Additionally, the parent companies have provided a committed overdraft facility of EUR 100 million which has not been utilized at December 31, 2012. The overdraft facility can be cancelled by the parent companies at one months notice. No commitment fees are paid on the facility. For details of the Groups loans and borrowings, refer to Note 24, Loans and borrowings.
114
The following table is an undiscounted cash ow analysis for both nancial assets and nancial liabilities that are presented on the consolidated statement of nancial position and off-balance sheet instruments such as loan commitments according to their remaining contractual maturity.
Due between 3 and 12 months Due between 1 and 3 years Due between 3 and 5 years
At December 31, 2012 EURm
Total
Due within 3 months
Due beyond 5 years
Non-current nancial assets Long-term loans receivable Other non-current assets Current nancial assets Current portion of long-term loans receivable Short-term loans receivable1 Available-for-sale investments Cash Cash ows related to derivative nancial assets net settled: Derivative contracts receipts Cash ows related to derivative nancial assets gross settled: Derivative contracts receipts Derivative contracts payments Accounts receivable2, 3 Non-current nancial liabilities Long-term liabilities Current nancial liabilities Current portion of long-term interest-bearing liabilities Short-term borrowings Cash ows related to derivative nancial liabilities net settled: Derivative contracts payments Cash ows related to derivative nancial liabilities gross settled: Derivative contracts receipts Derivative contracts payments Other nancial liabilities4 Accounts payable3 Contingent nancial assets and liabilities Loan commitments given undrawn5 Financial guarantee given uncalled Loan commitments obtained undrawn6
69 1 39 8 710 1 711 4 943 (4 802) 2 948 (901) (208) (125) (2) 2 709 (2 724) (10) (2 352) (34) 821
12 8 708 1 711 3 066 (3 005) 2 334 (8) (83) (70) (2) 2 318 (2 330) (10) (2 213) (28) 97
27 2 1 877 (1 797) 614 (55) (125) (55) 278 (280) (139) (6) (9)
39 1 (838) 113 (114) 733
30
Annual Report 2012
115
At December 31, 2011 EURm
Total
Due within 3 months
Due between 3 and 12 months
Due between 1 and 3 years
Due between 3 and 5 years
Due beyond 5 years
Non-current nancial assets Long-term loans receivable Other non-current assets Current nancial assets Current portion of long-term loans receivable Short-term loans receivable1 Available-for-sale investments Cash Cash ows related to derivative nancial assets net settled: Derivative contracts receipts Cash ows related to derivative nancial assets gross settled: Derivative contracts receipts Derivative contracts payments Accounts receivable2, 3 Non-current nancial liabilities Long-term liabilities Current nancial liabilities Current portion of long-term interest-bearing liabilities Short-term borrowings Cash ows related to derivative nancial liabilities net settled: Derivative contracts payments Cash ows related to derivative nancial liabilities gross settled: Derivative contracts receipts Derivative contracts payments Other nancial liabilities4 Accounts payable3 Contingent nancial assets and liabilities Loan commitments given undrawn5 Financial guarantee given uncalled Loan commitments obtained undrawn6
1 2
95 1 59 20 900 729 4 609 (4 614) 3 642 (402) (387) (896) (3) 4 726 (4 776) (20) (2 209) (86) 1 480
10 19 898 729 4 224 (4 230) 2 830 (1) (61) (809) (1) 4 293 (4 311) (20) (2 128) (37) 96
49 1 2 385 (384) 772 (2) (326) (87) (1) 433 (465) (63) (49) 1 384
37 1 40 (265) (1) (18)
53 (115)
5 (19)
Short-term loans receivable are included in other nancial assets. Accounts receivable maturity analysis does not include receivables accounted for based on the percentage of completion accounting method of EUR 1 164 million (EUR1573 million in 2011). 3 The fair values of accounts receivable and accounts payable are assumed to approximate their carrying values due to their short-term nature. 4 In 2012, other nancial liabilities include EUR 10 million non-derivative short-term nancial liabilities (EUR 20 million in 2011). Refer to Note 16, Fair value of nancial instruments. 5 Loan commitments given but undrawn have been included in the earliest period in which they could be drawn. 6 Loan commitments obtained undrawn have been included based on the period in which they expire and include related commitment fees.
For the above tables, a line-by-line reconciliation to the consolidated statement of nancial position is not possible due to the inclusion of off-balance sheet instruments such as loan commitments and the inclusion of interest receivable and payable.
116
Capital risk management The Group manages its capital and nancing to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Group reviews the capital structure and expected nancing requirements on a regular basis. For the Groups operations, the capital structure has been largely dened by the respective asset contributions of the parent companies on April 1, 2007, subsequent capital injections from the parent companies and the nancing requirements arising from operating and investing activities including restructuring activities.
EURm
2012
2011
Total loans and borrowings1 Less: Cash and cash equivalents Net cash Total equity Total capital
1
1 133 (2 418) (1 285) 2 452 1 167
1 605 (1 613) (8) 3 814 3 806
Total borrowings comprise long-term interest bearing liabilities, the current portion of long-term loans and short-term borrowings. In 2012, total borrowings are offset by short-term deposits of EUR 7 million (EUR 6 million in 2011) that were provided by the Group to Nokia and therefore reduce the amount presented in total borrowings above. Refer to Note 24, Loans and borrowings and Note 32, Related party transactions.
35 Subsequent events
On March 14, 2013 Nokia Siemens Networks B.V., Nokia Corporation and Nokia Finance International B. V. commenced an arbitration under the rules of the International Chamber of Commerce against Siemens AG. The claimants seek damages for an alleged breach by Siemens AG of warranties and other clauses in the Framework Agreement dated June 19, 2006 (as amended and restated) between the parties. Thealleged breaches arise out of a series of contracts entered between Siemens AS and the Norwegian Ministry of Justice and the Police dated December 22, 2006 immediately prior to the transfer of that contract to Nokia Siemens Networks B.V. and its afliates. The claimants seek damages presently estimated at EUR 238 million. The Group is aware that Siemens AG will contest both liability and amount.
Annual Report 2012
117
Company Financial Statements
Company Statement of Financial Position

(before proposed appropriation of result)
As at December 31 EURm
Notes
2012
2011
ASSETS Non-current assets Participations in group companies Deferred tax assets Long-term loans receivable Available-for-sale investments Current assets Other nancial assets Other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Shareholders equity Share capital Share premium Translation differences Fair value and other reserves Accumulated decit Loss for the year Total equity Non-current liabilities Provisions Deferred tax liabilities Current liabilities Loans from group companies Other liabilities
1 2 2
4 547 11 22 13 4 593 21 6 27 4 620
4 768 24 7 4 799 1 473 27 501 5 300
3 4
0 9 744 133 75 (6 163) (1 463) 5 6 2 326 556 19 575 7 8 1 684 35 1 719
0 9 744 136 (19) (5 453) (710) 3 698 438 13 451 1 096 55 1 151 1 602 5 300
Total liabilities Total equity and liabilities

2 294 4 620
118
Company Financial Statements
Company Income Statement
For the year ended December 31 EURm
2012
2011
2010
Loss from group companies after taxes Company loss for the year after taxes Loss for the period
(1 429) (34) (1 463)
(662) (48) (710)
(1 064) (26) (1 090)
Annual Report 2012
119
Notes to the Company Financial Statements
General notes for the preparation of the Company Financial Statements

The company nancial statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code and the rm pronouncements in the Dutch Accounting Standards as issued by the Dutch Accounting Standards Board. For the principles for the recognition and measurement of assets and liabilities and the determination of the result for its Company Financial Statements, Nokia Siemens Networks B.V. applies the option provided in Section 2:362 (8) of the Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as Accounting principles) of the Company Financial Statements of Nokia Siemens Networks B.V. are the same as those applied for the Consolidated Financial Statements under International Financial Reporting Standards. For the accounting policies for the Company statement of nancial position and income statement, reference is made to the notes to the consolidated statement of nancial position and income statement pages 67 to 117. The nancial information relating to Nokia Siemens Networks B.V. is presented in the Consolidated Financial Statements. In accordance with section 2:402 of the Netherlands Civil Code, the Company Financial Statements only contain an abridged income statement. Denition of Company: Company refers to the nancial statements of the Parent, Nokia Siemens Networks B.V. Denition of the Group: The Nokia Siemens Networks B.V. group of companies (The Parent and all its subsidiaries). Commitments and Refer to Note 29, Commitments contingencies: and contingencies, in the Consolidated Financial Statements. Consolidated Financial Refer to Note 1, Accounting Statements: principles: Basis of presentation section, in the Consolidated Financial Statements. Employees of the Company: The Company has two employees. Directors remuneration: Refer to Note 32, Related party transactions: Management compensation section, in the Consolidated Financial Statements. Nokia Siemens Networks B.V. Jesper Ovesen (Chairman), Board of Directors: Timo Ihamuotila, Joe Kaeser, Barbara Kux, Louise Pentland, Peter Y. Solmssen and Juha krs.
1 Participations in group companies

Group companies and other associated companies in which the Company exercises signicant inuence are stated at net equity value. Signicant inuence exists when the Company owns, directly or indirectly through subsidiaries, more than 20% of the voting rights of the company. Participations in group companies are initially acquired at the fair value of identiable assets and liabilities upon acquisition. Any subsequent valuation is calculated using the accounting principles applied in these nancial statements. Participations in group companies with negative equity values are carried at nil. A provision is recognized when the Company is fully or partially liable for the obligations of the group company or has the rm intention to allow the group company to settle its obligations. The long-term loan receivables are considered as part of the equity consideration when a provision is necessary. The following table reconciles the opening and closing balances of participations in group companies:
EURm
2012
2011
Net carrying amount January 1 Loss from group companies after taxes Dividend from group companies Additions, and acquisitions and disposals Translation differences Changes in other comprehensive income Transfers to provisions, net Other movements Net carrying amount December 31
4 768 (1 429) (75) 1 071 (2) 93 118 3 4 547
4 189 (662) (133) 1 187 38 31 108 10 4 768
The line item additions, acquisitions and disposals includes the capital injections and disposals done in the participations by the Company. The material transactions were capital injections in Nokia Siemens Networks Oy of EUR 900 million in 2012 and EUR 850 million in 2011. Additionally in 2011, there was EUR 315 million in an internal share deal purchase of Nokia Siemens Networks Japan Co. Ltd. by Nokia Siemens Networks B.V. from Nokia Siemens Networks Oy.
120
Participations in group companies at December 31, 2012:

Place of residence and country Group ownership %
Name
Full consolidation Nokia Siemens Networks MEA FZ-LLC Nokia Siemens Networks Afghanistan LLC Nokia Siemens Networks CJSC Nokia Siemens Networks Argentina S.A. Nokia Siemens Networks Holdings sterreich GmbH Nokia Siemens Networks sterreich GmbH Nokia Siemens Networks Australia Pty. Ltd. Nokia Siemens Networks Baku LLC Nokia Siemens Networks Banja Luka d.o.o. Nokia Siemens Networks d.o.o. za mrezne sisteme, Sarajevo Nokia Siemens Networks Bangladesh Ltd. Nokia Siemens Networks N.V. Nokia Siemens Networks EOOD Nokia Siemens Networks Bolivia S.A. Nokia Siemens Networks Servios Ltda. Nokia Siemens Networks do Brasil Sistemas de Comunicaes Ltda. IRIS Telekom FLLC Nokia Siemens Networks LLC Nokia Siemens Networks Canada Inc. Nokia Siemens Networks Schweiz AG Nokia Siemens Networks Chile Ltda. Hunan Hua Nuo Technology Co. Ltd. Nokia (Beijing) Communication Technology Service Co. Ltd. Nokia Siemens Networks (Beijing) Communications Ltd. Nokia Siemens Networks (China) Ltd. Nokia Siemens Networks (Suzhou) Supply Chain Services Co. Ltd. Nokia Siemens Networks (Tianjin) Co. Ltd. Nokia Siemens Networks Technology (Beijing) Co. Ltd. Nokia Siemens Networks Technology Service Co. Ltd. Nokia Siemens Networks (Hangzhou) Co. Ltd. Nokia Siemens Networks (Shanghai) Ltd. Nokia Siemens Networks (Suzhou) Co. Ltd. Nokia Siemens Networks Neusoft Commtech Co. Ltd. Nokia Siemens Networks System Co. Ltd. Nokia Siemens Networks Colombia Ltda. Nokia Siemens Networks Costa Rica S.A. Nokia Siemens Networks Czech Republic s.r.o. Nokia Siemens Networks Beteiligungen Inland GmbH & Co. KG Nokia Siemens Networks Beteiligungen Inland Management GmbH Nokia Siemens Networks Deutschland GmbH Nokia Siemens Networks GmbH & Co. KG Nokia Siemens Networks International Holding GmbH Nokia Siemens Networks Management GmbH Nokia Siemens Networks Management International GmbH Nokia Siemens Networks Operations GmbH Nokia Siemens Networks Optical GmbH Nokia Siemens Networks Services GmbH & Co. KG Nokia Siemens Networks Services Management GmbH Nokia Siemens Networks Transfergesellschaft mbH Nokia Siemens Networks Vermgensverwaltung GmbH Nokia Siemens Networks Vorratsgesellschaft 6 mbH Nokia Siemens Networks Danmark A/S Nokia Siemens Networks Algrie SARL Nokia Siemens Networks Ecuador S.A. Nokia Siemens Networks O Nokia Siemens Networks Egypt LLC
Dubai, United Arab Emirates Kabul, Afghanistan Yerevan, Armenia Buenos Aires, Argentina Vienna, Austria Vienna, Austria Sydney, Australia Baku, Azerbaijan Banja Luka, Bosnia-Herzegovina Sarajevo, Bosnia-Herzegovina Dhaka, Bangladesh Turnhout, Belgium Soa, Bulgaria Cochabamba, Bolivia Sao Paolo, Brazil Sao Paolo, Brazil Minsk, Belarus Minsk, Belarus Mississauga, Canada Zrich, Switzerland Santiago, Chile Changsha, China Beijing, China Beijing, China Beijing, China Suzhou, China Tianjin, China Beijing, China Beijing, China Hangzhou, China Shanghai, China Suzhou, China Liaoning, China Beijing, China Santafe de Bogota, Colombia San Jose, Costa Rica Prague, Czech Republic Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Munich, Germany Copenhagen, Denmark Algiers, Algeria Guayaquil, Ecuador Tallinn, Estonia Cairo, Egypt
100.00* 100.00** 100.00 100.00 100.00 100.00 100.00* 100.00* 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00* 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00** 60.00 83.90 54.00 83.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00* 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00*
Annual Report 2012
121
Name
Place of residence and country
Group ownership %
Nokia Siemens Networks S.A.E. Telcel S.A. Nokia Siemens Networks S.L. Nokia Siemens Networks Asset Management Oy Nokia Siemens Networks Oy Nokia Siemens Tietoliikenne Oy Nokia Siemens Networks France S.A. Apertio Ltd. Apertio Partners Ltd. Invergence Ltd. Nokia Siemens Networks UK Ltd. Nokia Siemens Networks Hellas A.E. Nokia Siemens Networks Guatemala S.A. Nokia Siemens Networks H.K. Ltd. Nokia Siemens Networks Honduras S.A. Nokia Siemens Networks Zagreb d.o.o. Nokia Siemens Networks Kft Nokia Siemens Networks TrafCOM Kft PT Nokia Siemens Networks Atrica Ireland Ltd. Nokia Siemens Networks Ireland Ltd. Nokia Siemens Networks - Technologies Israel (1990) Ltd. Nokia Siemens Networks Ethernet Solutions Ltd. Nokia Siemens Networks Israel Ltd. Nokia Siemens Networks Pvt. Ltd. Pishahang Communications Networks Development Company Nokia Siemens Networks Italia S.p.A. Nokia Siemens Networks S.p.A. Nokia Siemens Networks Japan Corp. Nokia Siemens Networks Kenya Ltd. Nokia Siemens Networks in Kyrgyzstan LLC Nokia Siemens Networks Korea Ltd. Nokia Siemens Networks Kuwait Company W.L.L Atrica Ltd. (Cayman Islands) Nokia Siemens Kazakhstan T.O.O. Nokia Siemens Networks Lanka Pvt. Ltd. UAB Nokia Siemens Networks Nokia Siemens Networks S.I.A. Nokia Siemens Networks Maroc SARL Nokia Siemens Networks S.R.L. Nokia Siemens Networks Delivery S.A. de C.V. Nokia Siemens Networks S.A. de C.V. Nokia Siemens Networks Servicios S.A. de C.V. Nokia Siemens Networks Sdn Bhd. Nokia Siemens Networks Nigeria Ltd. Nokia Siemens Networks Nicaragua S.A. Nokia Siemens Networks Finance B.V. Nokia Siemens Networks Nederland B.V. Nokia Siemens Networks Norge AS Nokia Siemens Networks NZ Ltd. Nokia Siemens Networks Peru S.A. Nokia Siemens Networks Philippines Inc. Nokia Siemens Networks Pakistan (Private) Limited Nokia Siemens Networks Sp. z.o.o Nokia Siemens Networks Portugal S.A. Nokia Siemens Networks Romania SRL Nokia Siemens Networks Srbija d.o.o. OOO Nokia Siemens Networks ZAO Nokia Siemens Networks
Cairo, Egypt Madrid, Spain Madrid, Spain Helsinki, Finland Helsinki, Finland Helsinki, Finland Bobigny, France Bristol, United Kingdom Bristol, United Kingdom Bristol, United Kingdom Huntingdon, United Kingdom Athens, Greece Guatemala City, Guatemala Hong Kong, China Tegucigalpa, Honduras Zagreb, Croatia Budapest, Hungary Budapest, Hungary Jakarta, Indonesia Clare, Ireland Dublin, Ireland Hod HaSharon, Israel Hod HaSharon, Israel Hod HaSharon, Israel New Delhi, India Tehran, Iran Milan, Italy Milan, Italy Tokyo, Japan Nairobi, Kenya Bishkek, Kyrgyzstan Seoul, South Korea Safat, Kuwait George Town, Cayman Islands Almaty, Kazakhstan Colombo, Sri Lanka Vilnius, Lithuania Riga, Latvia Rabat, Morocco Chisinau, Moldova Mexico City, Mexico Mexico City, Mexico Mexico City, Mexico Kuala Lumpur, Malaysia Lagos, Nigeria Managua, Nicaragua Haarlem, The Netherlands sGravenhage, The Netherlands Oslo, Norway Auckland, New Zealand Lima, Peru Makati, Philippines Islamabad, Pakistan Warsaw, Poland Amadora, Portugal Bucharest, Romania Belgrade, Serbia Moscow, Russia Moscow, Russia
75.20 100.00 99.90 100.00 100.00 100.00 99.99 100.00 100.00 100.00 100.00 100.00 100.00** 100.00* 100.00* ** 100.00 100.00 99.00 100.00 100.00 100.00 100.00* 100.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 100.00 100.00* 100.00 100.00 100.00 100.00 100.00 100.00* 100.00* ** 100.00 100.00* 100.00 100.00 100.00* 100.00 100.00 100.00 100.00 100.00 100.00 100.00* 100.00
122
Name
Place of residence and country
Group ownership %
Wireless Technologies Center LLC Nokia Siemens Networks AB Nokia Siemens Networks Holdings Singapore Ltd. Nokia Siemens Networks Singapore Pte. Ltd. Nokia Siemens Networks d.o.o. Nokia Siemens Networks Slovakia s.r.o. Nokia Siemens Networks El Salvador S.A. Nokia Siemens Networks (Thailand) Ltd. Nokia Siemens Networks CCC Tunisia SARL Nokia Siemens Networks Tunisia S.A. IRIS Telekomnikasyon Mhendislik Hizmetleri A.S . Nokia Siemens Networks Iletisim A.S . Nokia Siemens Networks Taiwan Co. Ltd. Nokia Siemens Networks Tanzania Ltd. Nokia Siemens Networks Ukraine LLC OOO MKM Telekom Nokia Siemens Networks Holdings USA Inc. Nokia Siemens Networks US LLC IRIS Telekom Toshkent LLC Nokia Siemens Networks Tashkent LLC Nokia Siemens Networks de Venezuela C.A. Belvory Assets Ltd. Cartwright Group Ltd. Nokia Siemens Networks Technical Services Vit Nam Ltd. Nokia Siemens Networks RSA Pty. Ltd. Nokia Siemens Networks South Africa Pty. Ltd. Associated companies and other equity stakes Fujian Funo Mobile Communication Technology Co. Ltd. Open Cloud Ltd. TD Tech Holding Ltd. Carrier Ethernet Solutions MobiRail V.O.F. ETSI Technologies Inc. Site-Con Inc. Nokia Siemens Networks Al Saudia Ltd.
Tomsk, Russia Stockholm, Sweden Singapore, Singapore Singapore, Singapore Ljubljana, Slovenia Bratislava, Slovakia San Salvador, El Salvador Bangkok, Thailand Tunis, Tunisia Tunis, Tunisia Istanbul, Turkey Istanbul, Turkey Taipei, Taiwan Dar Es Salaam, Tanzania Kiev, Ukraine Vyshgorod, Ukraine Delaware, USA Delaware, USA Tashkent, Uzbekistan Tashkent, Uzbekistan Caracas, Venezuela Tortola, British Virgin Islands Tortola, British Virgin Islands Phuong Mai, Vietnam Centurion, South Africa Centurion, South Africa
75.00 100.00* 100.00 100.00* 100.00 100.00 100.00** 100.00 100.00 100.00 100.00 100.00 100.00 65.00* 100.00 66.33** 100.00 100.00 100.00 100.00 100.00* 100.00 100.00 100.00 87.00* 100.00
Fuzhou, China Cambridge, United Kingdom Hong Kong, China Amsterdam, The Netherlands Rotterdam, The Netherlands Rizal, Philippines Makati, Philippines Riyadh, Saudi Arabia
49.00 35.00 51.00 40.00** 50.00 40.00 40.00** 49.00
* Provision recognized Refer to Note 6, Provisions, in the Company Financial Statements. **In process of liquidation.
Annual Report 2012
123
2 Other non-current assets

In 2012, long-term loans receivable consists of an investment of EUR 22 million (EUR 24 million in 2011) recognized at amortized cost using the effective interest rate. In 2012, available-for-sale investments consist of an investment of EUR 13 million carried at fair value (EUR 7 million in 2011).
3 Other receivables
In 2012, other receivables include EUR 11 million of accrued income tax and EUR 9 million intercompany accrued income with other group companies. In 2011, other receivables of EUR 473 million consist mainly of intercompany accounts receivable with other group companies.
4 Cash and cash equivalents

Cash and cash equivalents are comprised of bank and cash balances.
5 Shareholders equity
Refer to the Consolidated Statement of Changes in Shareholders Equity and Note 23, Issued share capital and share premium, in the Consolidated Financial Statements for a specication of shareholders equity.
6Provisions
EURm 2012 2011
At January 1 Transfers to participations At December 31
438 118 556
330 108 438
The provision recognized for participations in group companies relates to the Companys share in the equity decit since the Company has assumed liability for the obligations of these group companies. Refer to Note 1, Participations in group companies, in the Company Financial Statements for the participations provided for at December 31, 2012.
7 Current loans from group companies

EURm 2012 2011
Intercompany cash pool liability Other current loans from group companies Total loans from group companies
993 691 1 684
1 096 1 096
The intercompany cash pool liability carries an interest rate of 1 month LIBOR + 2.5%. Other current loans from group companies consist of short-term loans from Nokia Siemens Networks Finance B.V. with interest rates of 6.6% to 7.2%.
124
8 Other liabilities
EURm 2012 2011
Accrued tax liabilities Other liabilities Total
35 35
4 51 55
At December 31, 2012, other liabilities include EUR 14 million of accrued interest expense for intercompany loans, a charge of EUR 11 million for share-based compensation (refer to Note 25, Share based compensation in the Consolidated Financial Statements) and EUR 7 million of intercompany accounts payable. At December 31, 2011 other liabilities consisted mainly of intercompany accounts payable.
9 Audit fees
The following table presents the aggregate fees for professional services and other services rendered by PricewaterhouseCoopers:
EURm
2012
2011
2010
Audit fees Audit-related fees Tax fees Total
10.2 1.4 1.6 13.2
10.9 2.3 2.1 15.3
9.6 1.2 1.2 12.0
The fees listed above relate to the procedures provided to theCompany and its consolidated group companies by PricewaterhouseCoopers Accountants N.V., the Netherlands, the external auditor as referred to in Section 1(1) of the Dutch Accounting Firms Oversight Act (Dutch acronym: Wta), and by other Dutch and foreign-based PricewaterhouseCoopers rms, including their tax services and advisory groups. The total fees of PricewaterhouseCoopers Accountants N.V., the Netherlands, charged to the Company and its consolidated group entities amounted to EUR 0.1 million for each year presented.
10Guarantees
At December 31, 2012 Nokia Siemens Networks B.V. and Nokia Siemens Networks Oy act as the guarantors for the following: Restated EUR 1 350 million forward starting credit facility (FSCF) European Investment Bank loan (EUR 150 million) Nordic Investment Bank loan (EUR 80 million) At December 31, 2012 Nokia Siemens Networks B.V. acts as the guarantor for the following: Commercial paper program in Finland (EUR 500 million), launched in 2010, EUR 82 million issued at December 31, 2012 Finnish pension loan guarantee facility (EUR 132 million) At December 31, 2012 EUR 600 million term loan was outstanding under the restated EUR 1 350 million FSCF (EUR 613 million outstanding under the EUR 2 000 million revolving credit facility at December 31, 2011) and all nancial covenants are satised. The European Investment Bank and the Nordic Investment Bank loans and the Finnish pension loan guarantee facility include similar covenants to the restated EUR 1 350 million FSCF. All the nancial covenants are satised at December 31, 2012. Refer to Note 34, Financial and capital risk management, in the Consolidated Financial Statements. Nokia Siemens Networks B.V. issued BW2: Article 403 section 1b.C.C.2 statements to third parties for its Dutch wholly-owned subsidiaries, Nokia Siemens Networks Finance B.V. and Nokia Siemens Networks Nederland B.V. Commitments and contingencies not included in the statement of nancial position The Company forms a tax group for Dutch corporate income tax purposes with Nokia Siemens Networks Finance B.V. and Nokia Siemens Networks Nederland B.V. The Company is the head of the scal unity and therefore is the relevant tax payer for the Dutch corporate income tax due for the tax group. Under the Dutch Collection of State Taxes Act, the Company and its group members that are joined in the tax group for corporate income tax purposes are still responsible that the relevant corporate income tax due of the tax group is paid by the Company. In the event this is not the case, the Company and its group members could be jointly and severally liable for the corporate income taxes payable by the tax group.
NOKIA SIEMENS NETWORKS B.V. Board of Directors Statement of Signatures Espoo/Munich March 17, 2013
Jesper Ovesen (Chairman)
Louise Pentland
Timo Ihamuotila
Peter Y. Solmssen
Joe Kaeser
Juha krs
Barbara Kux
126
Other information
Proposed prot appropriation Pursuant to Article 34 of the Articles of Association, distribution of prots can only be made following the adoption of the annual accounts which show that such a distribution is possible. The prots shall be at the free disposal of the general meeting. However, the Company may only make distributions to shareholders to the extent that its equity exceeds the total amount of its issued share capital and the reserves to be maintained pursuant to law. In addition, a loss may only be applied against reserves maintained pursuant to the law to the extent permitted by law. Distributions of any other reserves or distributions to ordinary shares shall not take place until the cumulative preference share premium, cumulative preference shares prot reserves and unrecognized cumulative preference dividends have been fully distributed to the holders of the cumulative preference shares. Proposed appropriation of result The annual general meeting of the shareholders and the Board of Directors approve the allocation of the results. In a tie voting regarding a proposal to distribute or reserve prots, the prots concerned shall be reserved. This is in accordance with the Articles of Association. Subsequent events Refer to Note 35, Subsequent events, in the Consolidated Financial Statements.
Annual Report 2012
127
Independent auditors report
To: the General Meeting of Shareholders of Nokia Siemens Networks B.V. Report on the nancial statements We have audited the accompanying nancial statements 2012 of Nokia Siemens Networks B.V., The Hague as set out on pages 61 to126. The nancial statements include the consolidated nancial statements and the company nancial statements. The consolidated nancial statements comprise the consolidated statement of nancial position as at 31 December 2012, the consolidated income statement, the statements of comprehensive income, changes in shareholders equity and cash ows for the year then ended and the notes, comprising a summary of signicant accounting policies and other explanatory information. The company nancial statements comprise the company statement of nancial position as at 31 December 2012, the company income statement for the year then ended and the notes, comprising a summary of accounting policies and other explanatory information. Directors responsibility The directors are responsible for the preparation and fair presentation of these nancial statements in accordance with International Financial Reporting Standards as adopted by the European Union and as issued by the International Accounting Standards Board and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the directors report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the directors are responsible for such internal control as they determine is necessary to enable the preparation of the nancial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the companys preparation and fair presentation of the nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the nancial statements. We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our audit opinion.
Opinion with respect to the consolidated nancial statements In our opinion, the consolidated nancial statements give a true and fair view of the nancial position of Nokia Siemens Networks B.V. as at 31 December 2012, and of its result and its cash ows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and as issued by the International Accounting Standards Board and with Part 9 of Book 2 of the Dutch Civil Code. Opinion with respect to the company nancial statements In our opinion, the company nancial statements give a true and fair view of the nancial position of Nokia Siemens Networks B.V. as at 31 December 2012, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2: 393 sub 5 at e and f of the Dutch Civil Code, we have no deciencies to report as a result of our examination whether the directors report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2: 392 sub 1 at b-h has been annexed. Further we report that the directors report, to the extent we can assess, is consistent with the nancial statements as required by Section 2: 391 sub 4 of the Dutch Civil Code. Amsterdam, 17 March 2013 PricewaterhouseCoopers Accountants N.V. C.J. van Zelst RA
128
Glossary
2G (Second Generation Mobile Communications): 2G cellular telecom networks were commercially launched on the GSM (Global System for Mobile Communications) standard. 2G introduced data services for mobile, starting with SMS text messages. 3G (Third Generation Mobile Communications): The third generation of mobile communications standards designed for carrying both voice and data. 4G (Fourth Generation Mobile Communications): The fourth generation of mobile communications standards (like Long-Term Evolution, LTE) optimized for data and providing true broadband Internet access for mobile devices. Base station: A network element in a mobile network responsible for radio transmission and reception to or from a mobile device.
EICC (Electronic Industry Citizenship Coalition): A coalition of companies targeting at improving social, economic, and environmental conditions in the global electronics supply chain through use of a standardized code of conduct. Flexi Zone: A number of Flexi small cells which can be meshed together in a zone which collectively act as a single but distributed macro cell. GeSI (Global e-Sustainability Initiative): An initiative to further promote and support sustainable development in the information and communications technology sector.
GSM (Global System for Mobile Communications): A digital system for mobile communications that is based on a widely accepted standard and typically operates in the 900 MHz, 1800 MHz and 1900 MHz frequency bands. HSPA (High-Speed Packet Access): A wideband code division multiple access feature that refers to both 3GPP high-speed downlink packet access and high-speed uplink packet access. IP Multimedia Subsystems (IMS): Architectural framework designed to deliver IP based multimedia services on telco networks. Standardized by 3GPP.
Customer Experience Management (CEM) Software suite used to manage and improve the customer experience, based on customer, device and network insights. CEM on Demand: An intelligent portal offering a single entry point to customer centric insight and actions, even down to the individual customer. Insight is based on key performance indicators linking to prioritized actions with the most impact on the business and customer experience. Cloud (computing): The use of computing resources hardware and software that are delivered as a service over a network, typically the Internet. CDMA (Code Division Multiple Access): A digital cellular technology that uses spreadspectrum techniques.
Liquid Applications: Applications which can be hosted on an IT server blade attached directly to a base station.
Liquid Core: A product suite enabling dynamic capacity allocation across the different core network functions.
Annual Report 2012
129
Glossary
LTE (Long-Term Evolution): The fourth generation of mobile communications designed to provide high-speed broadband over a at, all-IP network.
Subscription: The contract between a mobile phone subscriber and the network carrier for its mobile phone services.
Operations Support Systems (OSS): The software systems handling management, assurance and fulllment for both networks and services. Packet Core (or Evolved Packet Core, EPC): A framework for providing voice and data services over a network. Radio Access Network (RAN): A mobile telecommunications system consisting of switching centers, radio base stations and transmission equipment. Subscriber: The term used to refer to a person that has an account with a mobile network carrier.
TETRA (Terrestrial Trunked Radio): Aprofessional mobile radio and two-way transceiver specication.
TD-LTE (Time Division Long-term Evolution): An alternative standard for LTE mobile broadband networks. WCDMA (Wideband Code Division Multiple Access): A third generation mobile wireless technology that offers high data speeds to mobile and portable wireless devices. Wi-Fi: A technology that allows an electronic device to exchange data wirelessly (using radio waves) over a computer network, including high-speed Internet connections. WiMAX (Worldwide Interoperability for Microwave Access): A technology of wireless networks that operates according to the 802.16 standard of the Institute of Electrical and Electronics Engineers (IEEE).
Subscriber Data Management (SDM): Technology providing unied management of network subscriber data.
130
Annual Report 2012
131
132
Mailing address Nokia Siemens Networks Oy P.O. Box 1 FI-02022 Nokia Siemens Networks Finland Visiting address Nokia Siemens Networks Oy Karaportti 3 02610 Espoo Finland +358 (0)7140 04000 nokiasiemensnetworks.com Registered address Nokia Siemens Networks B.V. Werner von Siemensstraat 7 2712 PN Zoetermeer The Netherlands
Designed by Further furthercreative.co.uk
This report has been printed in the UK by Pureprint Group, a CarbonNeutral company, using their environmental printing technology. Vegetable based inks were used throughout. The cover and text pages 160 of the report have been printed on Amadeus 50Gloss which is made from 50% post-consumer waste, and 50% virgin wood bre. Text pages 61-132 have been printed on paper produced from pulps sourced from fully sustainable forests and has been made without the use of elemental chlorine (ECF). Both manufacturing mills and printer are FSC certied and have been accredited with ISO14001 environmental management system
Copyright 2013 Nokia Siemens Networks. All rights reserved. Nokia is a registered trademark of Nokia Corporation, Siemens is a registered trademark of Siemens AG. www.nokiasiemensnetworks.com

NSN Form 2013 PDF

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

NSN Form 2013 PDF

Transféré par

Droits d'auteur :

Formats disponibles

Notes to the Consolidated Financial Statements

Enabling a mobile world

Financial Statements Consolidated Financial Statements 2012

Company Financial Statements2012

Visit our Annual Report online nokiasiemensnetworks.com/annualreport

Enabling a mobile world

Annual Report 2012

A word from our customer

Helping to build customer loyalty

Overview Who we are and what we do

The worlds mobile broadband specialist

Nokia Siemens Networks

Achievements An industry-leading 4G (LTE)portfolio with 77 commercial contracts atyear-end 2012

Annual Report 2012

Overview 2012 highlights

Execution, progressand momentum

13.4bn 822m 30.7% 1 .3bn

Key nancials 2012

13 372 822 6.1% (741) (5.5%) (1 445) 1 094

Nokia Siemens Networks

Maintained the lead and strong performance in packet core:

Annual Report 2012

Overview A letter from our Chairman

A year of signicant progress

* Excluding specic items.

Nokia Siemens Networks

Overview Our Board of Directors

Drawing on our expertise

Outgoing Niklas Savander Riikka Tieaho Siegfried Russwurm

To nd out more about our Board of Directors see p55

Annual Report 2012

A word from our customer

Readying the network for iPhone 5

Business review Chief Executive Ofcers strategic review

Excellent progress made in delivering cost savings

Strong performance in all key geographical markets

Strong cash generation

Rajeev Suri Chief Executive Ofcer

Operating prot before specic items

166 2010 2011 2012

Gross margin before specic items

Annual Report 2012

Business review Chief Executive Ofcers strategic review continued

Nokia Siemens Networks

Annual Report 2012

Business review Our senior management team

The leadership we need to deliver our strategy

Rajeev Suri Chief Executive Ofcer (CEO)

Samih Elhage Chief Financial Ofcer (CFO)

Kathrin Buvac Vice President, Corporate Strategy and CEOOfce

Deepti Arora Vice President, Quality

Hans-Jrgen Bill Executive Vice President, Human Resources

Nokia Siemens Networks

Alexander Matuschka Chief Restructuring Ofcer

Marc Rouanne Executive Vice President, Mobile Broadband

Hossein Moiin Executive Vice President, Technology and Innovation

Annual Report 2012

Business review Our strategy and transformation

Nokia Siemens Networks

Annual Report 2012

Business review Our strategy and transformation

Optimized real estate footprint

Improved R&D efciency

* Excluding specic items.