Finland Invests $1 Billion in Nokia to Boost National Influence

Finland's government investment arm has spent about EUR 844 million ($1.04 billion) on building a 3.3 percent stake in Nokia to strengthen national influence over the telecom network gear maker.

Nokia ruled the global mobile phone market a decade ago and the collapse of that business was a major cause of a decade of economic stagnation from which Finland is only just recovering.

Nokia, which employs 6,300 people in Finland in a global workforce of around 102,800, is now focused on the telecom network industry where it competes with Sweden's Ericsson and China's Huawei.

"We believe that this will be a good investment. One must remember that Nokia is Finland's largest company and its Finnish ownership has been rather thin," Solidium CEO Antti Makinen told Reuters.

Solidium, the government investment arm, built the stake by buying shares on the market over the early months of 2018.

It trimmed its stake in Swedish telecoms company Telia, steel firm SSAB and holding company Sampo in the past weeks to finance the investment in Nokia.

Makinen said Solidium would not seek a seat on Nokia's board at a shareholder meeting scheduled for May but that was an option it could look at in the future.

He noted that over time Solidium was looking to have board members in each of its companies. Makinen himself is proposed as a new board member of Sampo and pulp and packaging group Stora Enso this spring.

Asked if Solidium was looking to increase its stake in Nokia, he said that he was happy with the current stake and would not speculate on future investments.

Most of Solidium's stakes are to the tune of over 10 percent in a company's outstanding shares. The Nokia investment accounts for around 11 percent of its total equity stakes.

According to Nokia's webpage, three Finnish pension funds at this point own less than 3 percent of Nokia.

Brighter outlook
Nokia shares were flat at 1010 GMT. The company declined to comment on the news.

"For a long-time investor like Solidium, this is a good time to enter Nokia... The market outlook is brightening and the stock's valuation is low. And this a significant technology company for Finland," said Mikael Rautanen, analyst at Inderes Equity Research, with a "Buy" rating on the stock.

Nokia said last month that major telecom operators were accelerating their timelines for adopting next-generation 5G networks, boosting the company's confidence in an uplift for its business later this year.

"The appealing factors for us are the company's strong market position combined with broad technological expertise," Makinen said.

Solidium was founded a decade ago as a bid to distance politicians from the state's holdings. It manages minority holdings in 13 listed Finnish companies which mainly originate from an era of state-led industrialisation.

Its mandate is to keep significant Finnish companies "more or less Finnish", Makinen told Reuters in an interview last month, adding that the priority was to help the companies to succeed and not for example to protect Finnish jobs.

Nokia and Microsoft, which bought the Finnish company's phone business in 2014, have slashed thousands of jobs in the country in the past decade. Disagreements over how Solidium should be run led to dismissal of its former chairman, and prompted a strategic reform last year, including the drive to take up board seats.

© Thomson Reuters 2018