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Whirlwind wedding for Nokia & Alcatel

Wednesday, April 15, 2015 - 02:19

Nokia and Alcatel-Lucent detail the terms of a merger that could, it's claimed, redefine the telecom equipment sector and present a fresh challenge to market leader, Ericsson. David Pollard reports.

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A short engagement - already, it seems, a whirlwind marriage. Just a day after announcing talks, Finland's Nokia and Alcatel-Lucent of France say they are to merge. Nokia chief Rajeev Suri. (SOUNDBITE) (English) NOKIA CEO, RAJEEV SURI, SAYING: "We will have a strong presence in every part of the world, including leading positions in the United States and China. Together we expect to have the scale to lead in every are in which we choose to compete." There had been concerns the French government might wag a finger at possible job cuts. Those fears though laid to rest with an official blessing when the two CEOs visited President Francois Hollande on Tuesday. Nokia says there'll be no more redundancies than already announced. And is offering Alcatel an all-share transaction that values the French group at 15.6 billion euros. A permanent union - but is it at a good price? Nokia shares rose 2 percent on the news. Alcatel's fell 11 percent - though that was after a strong surge on hopes for a merger. Mike Ingram of BGC Partners. SOUNDBITE (English) MIKE INGRAM, BGC PARTNERS, SAYING: ''It's probably a good deal for both, in all honesty. It could well be that Nokia's going to have to look again at the share ratio - at the moment, Alcatel-Lucent shareholders stand to own about a third of the merged company, maybe that needs to go somewhat higher. I am also somewhat surprised by the way that it is an all-paper deal. I'm not sure that that this financially optimal and I suspect there are political reasons for keeping existing Alcatel shareholders on board.'' Painting itself as a global player, the combined firm will have a mobile equipment market share of 35 percent. Cost savings are promised - around 900 million euros by the end of the decade. Combined sales come in around 26 billion euros. That puts them in position to rival sector leader, Sweden's Ericsson, and ahead of China's Huawei. But: sceptics point to a poor record of mergers in telecom equipment. SOUNDBITE (English) MIKE INGRAM, BGC PARTNERS, SAYING: ''There is significant implementation and execution risk implicit in this deal and because of that fallout, i.e. because Nokia management's eye might be taken off the ball in the next few years, Ericsson might actually be in a position to pick up some business.'' The deal should be finalised in the first half of 2016. It could take several years after that to see whether the sector's M&A history will blight this union too.

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Whirlwind wedding for Nokia & Alcatel

Wednesday, April 15, 2015 - 02:19