Nokia, Siemens agree to combine phone equipment units

Iran Materials 19 June 2006 12:00

(AFP) - Technology giants Nokia of Finland and Siemens AG of Germany have agreed to combine their phone equipment units in a deal worth about 25 billion euros (31.5 billion dollars), US newspapers reported.

The two firms were expected to announce the merger on Monday, the Wall Street Journal and the New York Times reported, citing unnamed sources involved in the transaction, reports Trend.

The merger, if completed, would create the world's third largest network equipment company behind Ericsson and the recent merger of Lucent and Alcatel, the papers said.

Under the deal, both companies would contribute their network equipment operations to the entity which would be based in Finland, the Wall Street Journal wrote.

Each side would retain a 50 percent stake in the new company while Nokia would play a greater role in management, with Nokia executive Simon Beresford-Wylie to serve as chief executive, it said.

The merger reflects a trend towards consolidation in the telecommunications industry and low-price competition from Asian firms. Nokia and Siemens hope to save 1.25 billion euros annually by cutting duplicated research and development costs and other expenses, the Journal wrote.

The combination could be "particularly powerful in supplying the mobile-telephone industry," it said.

Both companies have previously shied away from global mergers.

Shortly before taking over as the new chief executive of Nokia, Olli-Pekka Kallasvuo hinted last month in an interview with the Financial Times that the world's biggest mobile phone manufacturer would likely pursue acquisitions and partnerships with its war chest of nine billion euros (12 billion dollars).

"In a situation where the business environment is getting more complex, a pragmatic look at partnerships and acquisitions will be necessary," Kallasvuo told the Financial Times at the time. "We are expanding from traditional mobile phone telephony. Now we are talking about the convergence of the internet, mobility, IT and music."