Siemens, Nokia to merge telecoms divisions

19th June 2006, Comments 0 comments

19 June 2006, FRANKFURT - Germany's Siemens and Finland's Nokia announced Monday plans to merge their telecommunication equipment divisions in a move which would create the world's third-biggest equipment group. Each company will hold 50 per cent of the new concern, Nokia Siemens Networks, which will provide infrastructure for fast-growing telecommunications traffic. Based on both companies' performances, Nokia Siemens Networks would have posted 15.8 billion euros (19.9 billion dollars) in revenues last ye

19 June 2006

FRANKFURT - Germany's Siemens and Finland's Nokia announced Monday plans to merge their telecommunication equipment divisions in a move which would create the world's third-biggest equipment group.

Each company will hold 50 per cent of the new concern, Nokia Siemens Networks, which will provide infrastructure for fast-growing telecommunications traffic.

Based on both companies' performances, Nokia Siemens Networks would have posted 15.8 billion euros (19.9 billion dollars) in revenues last year and would have some 60,000 employees.

The merger - which still requires approval by competition authorities - is aimed at generating cost savings of 1.5 billion euros (1.9 billion dollars) a year by 2010, the companies said.

This would partly be done by axeing up to 9,000 employees, the companies said.

European and US telecoms companies are struggling to compete with lower-cost Asian companies.

Investors welcomed the move. Siemens shares were up almost 8 per cent to 67.75 euros and Nokia stocks rose over 3 per cent to 16.16 euros.

"We are seeing a new top league player emerging," said Siemens CEO Klaus Kleinfeld speaking at a Frankfurt news conference with his Nokia counterpart, Olli-Pekka Kallasvuo.
Kleinfeld said he saw a convergence of land lines, mobile phones and entertainment and that the Siemens-Nokia alliance was aimed at exploiting this development.

Nokia appears set to play a leading role in the merger. The new company will have its headquarters in Helsinki with the current boss of Nokia Networks, Simon Beresford-Wylie, expected to take the helm as chief executive.

"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 in a statement.

Former head of Nokia Networks, Sari Baldauf, said the deal makes sense.

"I think it is a wise move and it is good that Simon Beresford- Wylie leads the whole business," Baldauf told Finnish news agency STT.

Baldauf stepped down 18 months ago and was succeeded by Australian national, Beresford-Wylie.

Competitors also welcomed the news, with Sweden's Ericsson saying the deal would increase competition and growth in the industry.

"We see the merger as natural," Ericsson chief executive Carl- Henric Svanberg said in a statement.

Henry Stenson, Ericsson senior vice president for corporate communications, told Deutsche Presse-Agentur dpa that the announcement was "a step in the consolidation" of the telecom industry, noting Ericsson's recent acquisition of Marconi and the alliance between Alcatel and Lucent.

Based on current market share data, Nokia Siemens Networks was the second-largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the telecoms infrastructure market.

Overall, Nokia Siemens Networks would be number three worldwide with the alliance of Alcatel and Lucent in first place, followed by Ericsson/Marconi.

DPA

Subject: German news

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