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Nokia, Siemens Form Networks Venture

Tue, 02/27/2007 - 2:47pm
Susan Rush

Consolidation is alive and well in the wireless sector, as Nokia and Siemens are the latest players to jump into the fray. The companies announced plans to merge their phone-equipment businesses to form Nokia Siemens Networks.

The 50-50 joint venture will concentrate on fixed and mobile network infrastructure and services, according to the companies. Specifically, Nokia will combine its network business group with Siemens' carrier-related operations.

In a newly released research note, Lehman Brothers analysts weigh the pros and cons of the planned merger. "From a Nokia perspective, this deal clearly addresses its weakness in the wireline part of the market and thus gives a better positioning as operators push fixed mobile convergence," wrote analysts Tim Luke and Stuart Jeffrey, who also point out that the deal may cause investors concern given the restructuring process that must take place.

Rivals in the space include Ericsson and Lucent Technologies and Alcatel. The latter two companies recently announced merger plans of their own.

The Nokia, Siemens tie-in is expected to close before Jan. 1, 2007, after receiving customary regulatory approvals and meeting other closing conditions. The Nokia Siemens Networks unit is expected to help the companies realize cost savings of $1.9 billion by 2010.

In addition to cost savings, the combined units will reduce headcount between 6 percent and 9 percent over the next four years.

Lehman Brothers calculates the combined unit will hold a 32-percent share of the GSM/WCDMA market - 31 percent in GSM and 33 percent in WCDMA.

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