Two telecoms firms agree merger that will create conglomerate worth £29 billion
Nokia has agreed an £11 billion all-share merger with rival telecoms manufacturer Alcatel-Lucent that aims to rival market leader Ericsson.
The combined company, which will be called Nokia Corporation, will have a market capitalisation of £29 billion with Nokia shareholders owning two thirds of the business and Alcatel-Lucent shareholders the remainder.
The two companies were previously lagging far behind telecoms equipment market leader Ericsson which has 40 per cent of the market (Bernstein Research). The combined company will have a marketshare of 35 per cent ahead of third placed Huawei which holds 20 per cent.
Nokia chief executive officer Rajeev Suri will remain as chief executive with three Alcatel-Lucent executives joining a ten man-board.
Nokia, which sold its handset division to Microsoft for £4.5 billion last year, has also announced a potential sale of its mapping business, HERE, as it looks to focus on the networking business.
“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are,” said Nokia president and chief executive officer Rajeev Suri.
The combined company will have 40,000 R&D employees and an R&D spend of £3.4 billion in 2014. However, it is targeting cuts of £650 million by the year as part of a post-merger efficiency drive.
Nokia launched the network division as part of a joint venture with Siemens, ‘Nokia Siemens Networks’ (NSN) in 2006, but has struggled to make a significant impact in the market when compared to its rivals, particularly around 4G/LTE.
It has cut more than 17,000 jobs since 2011. Nokia bought out Siemens share for $2 billion last August rebranding as Nokia Solutions and Networks. It has operations in more than 130 countries and employs more than 62,000 staff.
Alcatel has undergone a number of changes to address falling profits, cutting around 10,000 staff since 2013 as a part of a €1 billion cost reduction effort. It current employs around 70,000 staff.
The firm achieved profits of €284 million in fourth quarter results, falling well below the €304 predicted by market analysts.