Technology giants Nokia Corp. and Siemens AG announced today that they will merge their wireless phone networks in a deal estimated at about US $30 billion by analysts. The combined operation—to be split 50-50—will be called Nokia Siemens Networks.
The companies cited the scale and reach of their respective fixed and mobile product platforms and services as the rationale behind the massive joint venture. They also said the arrangement will create one of the world's best research and development teams. Siemens and Nokia are leaders in global market share for wireless communication services and will use their combined strengths to leverage growth in developed and emerging markets.
"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," said Nokia CEO Olli-Pekka Kallasvuo, who will serve as chairman of the new network. "The communications industry is converging, and a strong and independent Nokia Siemens Networks will be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology."
According to the companies, the combined operation will employ 60 000. It will have annual revenue of more than the 15.8 billion euros that both earned in 2005 and become the world's second largest company in mobile infrastructure, second in services, third in fixed infrastructure, and third largest in the overall telecommunications infrastructure market—largely behind Ericsson.
"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," said Siemens CEO Klaus Kleinfeld. "This combination creates a leading industry player, with immediate strength, excellent potential for growth, and well-positioned to improve profitability in the future."
Upon formal approval of the merger, the executive vice president and general manager of networks at Nokia, Simon Beresford-Wylie, will become CEO of Nokia Siemens Networks, which will be headquartered in Helsinki, with regional headquarters in Munich.
Initial reaction from industry analysts on the consolidation was positive. "Nokia has had difficulties being real strong on the network side," said David Larsson, an analyst with IT Research in Stockholm. "Now they will have a better position, and this will also help on the cellphone side. Ericsson's system business will have a tougher challenger now."
It's a sign of things to come in the globally expanding—and consolidating—world of telecommunications.