Nokia & Siemens in £17bn Deal

Nokia & Siemens in £17bn Deal

Nokia and Siemens are merging their mobile and fixed-line phone network equipment businesses in a deal worth £17bn.

Both companies will have a 50% stake in the infrastructure firm, to be called Nokia Siemens Networks and based in Nokia’s home country of Finland.

Nokia would have bigger sway over management, however, getting a majority of board seats and installing its executive Simon Beresford-Wylie as CEO. The venture would also be headquartered in Nokia’s home country of Finland.

David Dyer at Siemens UK said however that the Enterprise Sales business at the COM division was not part of the deal and would remain within Siemens. This means HiPath systems.

The firms hope synergies will to save 1.5bn euros annually by 2010.

The move follows a tie-up between French phone equipment firm Alcatel and US company Lucent Technologies.

The savings will come from areas such as research and development costs.
Siemens said the new company would have “a world-class fixed-mobile convergence capability, a complementary global base of customers, a deep presence in both developed and emerging markets and one of the industry’s largest and most experienced service organisations”.

The new firm will be the world’s third biggest phone equipment network. Swedish firm Ericsson is the largest.

Products:

Nokia Siemens Networks will be able to offer its operator customers a comprehensive portfolio of fixed and mobile network products supported by a full range of professional services. The company’s portfolio will include Next Generation Network convergence products like IMS (IP Multimedia Subsystem), 2G GSM/EDGE access (Enhanced Data rates for GSM Evolution), 3G WCDMA/HSDPA access (Wideband Code Division Multiple Access/High Speed Downlink Packet Access), extensive mobile core, fixed broadband, transport, IPTV (Internet Protocol Television), LTE (Long Term Evolution), WiMAX (Worldwide Interoperability for Microwave Access) and low-cost mobile voice products tailored for emerging market operators.

The estimated cost synergies of EUR 1.5 billion annually by 2010 are expected to come primarily from the elimination of overlapping functions, consolidation and better utilization of sales and marketing organizations, reduction of overhead costs, sourcing benefits, and greater efficiencies in R&D. A substantial portion of these synergies is expected to be realized in the first two years. These changes are expected to result in a headcount adjustment over the next four years in the range of ten to fifteen percent from the initial combined base of approximately 60,000. Detailed headcount reduction assessments will be made as part of the integration planning process and subject to required consultation with employee representatives.

Both Nokia and Siemens expect the impact of the partnership on their respective EPS, on a pro forma basis excluding the restructuring charges, to be accretive by the end of 2007 assuming a closing by January 1, 2007