Shares in Nokia fell to below 4 euros to their lowest levels since January 1998 after the statement on Wednesday.
NSN, the world's No. 2 maker of wireless-networking gear, has struggled to make a profit since its formation in 2007, hit by falling operator spending and price cuts by market leader Ericsson
Along with efforts to generate cost savings, NSN said it plans to further improve the competitiveness of the company as a standalone entity.
Nokia and Siemens talked to various private equity firms for a year, trying to sell a stake, but last month the Wall Street Journal reported the talks were to fail.
At that point talks with private equity group including Gores Group LLC were still continuing, sources told Reuters.
The timing for selling the unit could hardly have been worse; there are clear signs from companies like LG and ASML of European handset market descending into a slump and selling a mobile network company on the eve of a handset market downturn is a tough challenge, said MKM Partners' analyst Tero Kuittinen.
(Reporting by Helsinki Newsroom; Editing by David Holmes)