Nokia, Alcatel-Lucent Planning Massive Merger

Finnish cell phone manufacturer Nokia and French manufacturer Alcatel-Lucent are forming a massive merger.

According to ZDNet, Nokia has sent a memorandum of understanding, or MOU, with the intent to merge with Alcatel-Lucent for $16.6 billion (€15.6 billion). The MOU spells out how the new company, under the name Nokia corporation, Alcatel-Lucent shareholders will hold 33.5 percent of the stock, while Nokia will carry 66.5 percent of the stock after the merger.

Company headquarters will be in Finland, but there will be a presence in France. Nokia chairman Risto Siilasmaa will chair of the new company, and Nokia CEO and president Rajeev Suri would be the CEO upon the completed merger.

The board will include nine or ten members, with three from Alcatel-Lucent, one being a vice-chairman, once the merger is complete.

Both companies’ boards of directors have approved the merger and now await approval from Nokia shareholders and regulatory approval. The merger agreement should be finalized early in 2016.

Nokia said the merger will not change any jobs in France this year, but will allow create more research and development jobs in the coming years. Nokia also will acquire Shanghai Bell, China’s Alcatel-Lucent presence.

Both companies agree that they share a highly comparable portfolios, in the fields of fixed and mobile broadband, IP routing, core networks, and cloud services in shared geographies, like the United States, China, Europe, and the Asia Pacific. A merger would benefit both.

NASDAQ is reporting that the industry is hoping that the merger will bring more buying power to the industry. And, if the deal is completed, the massive merger would create a company in excess of $40 million in terms of current prices. Both companies made combined sales of $27 million in 2014, just edging out giants Ericsson and Huawei.

The merger could give Nokia an edge over both Ericsson and Huawei in terms of customer necessity. All three offer a solid infrastructure, which allows customers access to the internet and cell phone usage. The biggest difference is that now, Nokia can undercut the other carrier’s prices to become more attractive to potential customers.

Still, fears of potential monopolization are becoming louder. Ericsson, Huawei, and Nokia already possesses 80 percent of the global revenue market. Alcatel-Lucent themselves possess another 10 percent. Many fear that after the merger, less choices could lead to higher prices and poorer service and quality.

With Alcatel-Lucent already present in the United States, Nokia could tap into that market once the merger is complete. Alcatel and Lucent merged back in 2006, when AT&T spun off Lucent. Lucent maintains relations with AT&T, as well as Verizon. Huawei, however, is having issues gaining a foothold in the United States, due to the continued mistrust between the American and Chinese governments. A 2012 congressional report advised U.S. telecommunications services to avoid using Huawei due to Huawei’s networking gear having security risks, a charge Huawei denies.

[Image courtesy of Rappler]