Nokia, Alcatel agree to €15.6 billion merger

April 15, 2015

Finnish Telecom equipment manufacturer Nokia has few moments ago confirmed plans to take over of French telecoms equipment company Alcatel Lucent in a €15.6 billion deal.Nokia merger with Alcatel-Lucent would combine the industry’s two laggards players compared to Ericsson and Huawei.According to Euro News, the marriage has received the support of the French government and it will be through a public exchange of shares in France and the United States.Espoo-based Nokia is said to be putting a lot of efforts to become a market leading operator of global networks, and looks to cut costs and achieve scale in the market of providing the networks that mobile phones use.The two expect the deal which is subject to regulatory and shareholder approval to close in the first half of 2016. Both companies’ boards have given their approval to the takeover.”The combined company will be uniquely positioned to create the foundation of seamless connectivity for people and things wherever they are,” Nokia said in a statement posted online.”This foundation is essential for enabling the next wave of technological change, including the Internet of Things and transition to the cloud.”The combined company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.

“Once the transaction closes, Nokia will look to achieve a €900 million reduction in operating costs by 2019, plus a €200 million drop in interest expenses by 2017.The reduction in operating costs would result in organizational streamlining, rationalization of overlapping products and services, central functions, and regional and sales organizations, Nokia said.Nokia said the all-share transaction would be on the basis of 0.55 of a new Nokia share for every share of Alcatel-Lucent. The share offer values the French business at 15.6 billion euros.Your blogger thinks the deal puts Nokia among the global market leaders in networks.Nokia is clearly focusing on its networks operations, and this acquisition makes it a big enough player to clearly challenge Ericsson, perhaps even in several sectors.The combined company, known as Nokia Corp., would be based in Finland with “a strong presence in France,” Nokia said.Nokia CEO Rajeev Suri was upbeat about the takeover yesterday, saying he firmly believes it is “ the right deal, with the right logic, at the right time.” Alcatel-Lucent CEO Michel Combes admitted a “pang of sadness in the heart” at the demise of the Alcatel brand, but he defended the deal as focusing on “development and growth.”“We had difficult periods, but now we are one of the building bricks for what will become a global technology giant,” Combes said.

“Nokia is becoming today the leader of telecommunications networks, thanks to Alcatel-Lucent.”It will also work to reduce overhead costs associated with real estate, manufacturing, supply chain, IT and administration.Alcatel currently employs around 52,600 workers globally – predominantly in North America – 20,000 of which are focused on research and development.Nokia will retain Alcatel’s Bell Labs R&D brand, which is forecast to host the group’s networks-focused innovation efforts.Should the acquisition be successful, the entity’s French presence will include a 5G/small cell R&D centre of excellence and a cyber security lab.Nokia has also pledged to pour €100 million into a fund for French start-ups in the areas of Internet of Things and the industrial internet.In the US, Nokia expects the combination of Alcatel’s Bell Labs and Nokia’s FutureWorks to provide “unparalleled innovation capabilities”. “A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications,” Alcatel CEO Michael Combes said in a statement.

Contador Harrison