Nokia, Siemens Merge Infrastructure Businesses

Staff Reporter -- Electronic News, 6/19/2006

Nokia and Siemens today announced plans to embark on a 50-50 joint venture dubbed Nokia Siemens Networks that will combine the fixed and mobile network infrastructure businesses of the companies.

The companies said that they expect Nokia Siemens Networks to expand their scale and global reach and eventually become a global leader in the industry.

Nokia Siemens Networks will have its operational headquarters Helsinki, Finland, and regional headquarters in Munich, Germany, where three of the future five divisions of the new company will be based.

The merger has $19.8 billion (15.8 billion euro) in pro forma annual revenues, the companies noted, and is expected to start operations with 60,000 employees. Based on current market share data, Nokia and Siemens claim, it will be the second largest company in mobile infrastructure, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market. The companies expect to reach annual synergies of $1.9 billion (1.5 billion euro) by 2010.

Nokia Siemens Network's portfolio will include next-generation network convergence products like IMS, 2G GSM/EDGE access, 3G WCDMA/HSDPA access, extensive mobile core, fixed broadband, transport, IPTV, LTE, WiMAX and low-cost mobile voice products made for emerging market operators.

Simon Beresford-Wylie, current executive VP and general manager of networks at Nokia, will be Nokia Siemens Networks' CEO immediately upon the closing of the merger, which the companies expect to occur by January 2007. Peter Schonhofer, a
member of the executive board of Siemens AG Austria, will assume the position of CFO.

"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," Olli-Pekka Kallasvuo, Nokia's CEO, said in the statement. "The communications industry is converging, and a strong and independent Nokia Siemens Networks will be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology."

Kallasvuo will also serve as chairman of Nokia Siemens Networks.

"This joint venture is an important step to strengthen our position in the market sustainably and to enable us to offer the best state of the art converged technologies and services to our customers," Klaus Kleinfeld, CEO of Siemens, said in the statement. "This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability."

The news wasn’t all good, however. After the first two years, Nokia Siemens Networks will likely make a "headcount adjustment," cutting 10 percent to 15 percent of the initial workforce of 60,000, the companies noted.