The pace of consolidation heated up in the telecoms industry yesterday as Nokia and Siemens agreed to create the world's third-largest network equipment supplier in a move that puts a trio of companies far ahead of rivals.
Alcatel-Lucent, Ericsson-Marconi and Nokia Siemens Networks will all have more than double the revenues of competitors such as Nortel, Motorola and Huawei who may now come under pressure to seek deals themselves.
This marks the first strategic decision by Nokia's new chief executive, Olli-Pekka Kallasvuo. It also represents a symbolic break with telecoms by Siemens, founded 160 years ago as a telegraphy firm.
The Finnish and German groups are creating a 50-50 joint venture despite Siemens bringing €9.2 billion of the €15.8 billion annual revenues and 40,000 of the 60,000 workers. But Siemens' telecoms business has much lower operating profit than Nokia's, leading the German group to believe its half stake was the best deal possible.
Synergies of at least €1.5 billion are to be targeted by 2010 and 6,000-9,000 jobs are likely to be cut, with the new company taking a restructuring charge of €1.5 billion.
"The deal is flawless - a new titan emerges," Klaus Kleinfeld, Siemens' chief executive, said as he describedthe combination as "the best we could come up with" for his struggling division.
The joint venture will be based in Helsinki while Nokia has named its head, Simon Beresford-Wylie, and will take the lead in management issues.
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