Nokia and Siemens to merge network arms

Mobile phone giants Nokia and Siemens are merging their mobile and fixed-line phone network equipment businesses to create a separate company worth US$31.5 billion.

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By  Dylan Bowman Published  June 25, 2006

Mobile phone giants Nokia and Siemens are merging their mobile and fixed-line phone network equipment businesses to create a separate company worth US$31.5 billion. The move will however lead to up to 9,000 job losses over the next four years, the firms warned last week. The new company, Nokia Siemens Networks, will be the second largest mobile equipment player in the world, third largest in the fixed infrastructure market, and fourth biggest overall in the telecoms infrastructure sector, with Nokia and Siemens estimating that combined revenues of their equipment businesses totalled US$19.9 billion last year. No money is changing hands in the 50-50 venture, both firms said. Also Olli-Pekka Kallasvuo, Nokia CEO and now chairman of Nokia Siemens Networks, said a strong and independent combined company would be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology. “We believe the partnership with Siemens is the most effective way to build the scale and broad product portfolio necessary to compete globally and create value for shareholders,” he said. The move follows the US$34 billion merger in April of two more of the industry’s biggest players, Alcatel and Lucent, to create the second largest telecoms infrastructure company in the world behind market leader Cisco Systems. The Nokia-Siemens deal will see as many as 9,000 jobs cut — around 15% of the new companies’ combined 60,000 workforce — over the next four years as the firms try to achieve cost synergies of US$1.9 billion annually by 2010. Analysts have hailed the venture as a good move for both companies, one that will allow them to grow more quickly in a low-growth market. “I think in the longer term it’s good. For Nokia, it’s size, and size matters when you’re talking about the networks services business,” Hannu Rauhala, Helsinki-based Opstock analyst, told Reuters. “Siemens has a very good position in fixed-line networks, and it offers very good possibilities when you are talking about convergence,” Rauhala added. Nokia and Siemens said their new company would offer its operator customers a ‘comprehensive’ portfolio of fixed and mobile network products such as IMS, 2G GSM/Edge access, 3G WCDMA/HSDPA access, IPTV, LTE and WiMax. Simon Beresford-Wylie, currently Nokia Networks executive vice president and general manager, will take up the position of Nokia Siemens Networks CEO immediately upon the closing of the merger — expected by the end of the year. “Together, the collective Nokia and Siemens teams will be a powerful force in the industry as we pursue our future goals of providing unequalled customer satisfaction and of becoming the undisputed industry champion,” Beresford-Wylie commented. Klaus Kleinfeld, Siemens CEO, added: “This joint venture is an important step to strengthen our position in the market sustainably and to enable us to offer the best state of the art converged technologies and services to our customers.”

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