Nokia and Siemens to merge network infrastructure to contain Ericcson

19 June 2006

The merger relates to infrastructure, not handsets as Siemens has already divested its unprofitable handsets business.

The size of the merger, which is due to be finalised by January 1, 2007, has been estimated at approximately €25 billion. Nokia Networks'' CEO Simon Beresford-Wylie, who took the top job in Nokia last year, is slated to head the new company.

To be called Nokia Siemens Networks, the new entity seeks to combine Siemen's networks business group and Nokia''s carrier-related operations. The combined entity will have a 21-per cent share of the wireless equipment market, estimated at $65 billion. Ericsson has an approximately 26-per cent market share.

The combined entity will be one of the world''s largest network firms with expected annual sales of €16 billion ($20.2 billion) and cost savings of €1.5 billion a year by 2010. Both companies will have a 50-per cent stake in the infrastructure company, to be based in Finland. The new entity would have access to the global customers base of both companies, enabling it to rapidly develop a presence in developed and emerging markets.

Telecom consolidation in the West has been necessitated largely because of low-price competition from Asia telecom businesses. This is Europe''s second major telecom consolidation after the $13.4 billion stock swap in which France's Alcatel SA agreed in April 2006 to buy Lucent Technologies Inc, to combine the world''s biggest maker of broadband internet equipment with the largest US producer of phone gear.

Earlier in October 2005 Ericsson agreed to buy Marconi Corp.''s broadband internet and telecommunications assets for £1.2 billion pounds ($2.2 billion) to expand in fixed-line equipment.