Nokia Buys Alcatel-Lucent For $16.6 Billion to Regain Lost Glory
Nokia is strengthening its position in the telecom equipment sector as the company looks to purchase Alcatel-Lucent in an all-share deal. The Finnish company is reportedly about to pay $16.6 billion (15.6 billion euros) as it looks to compete with market leader Ericsson.
The move will make the combine company bigger than Huawei share-wise but it would still lag behind Swedish company Ericsson. Nokia will attain a global market share of 35 percent, while Huawei owns 20 percent of the market share and Ericcson has 40 percent.
It will also give exposure to the new Nokia in North American market, with key contracts with AT&T and Verizon.
Nokia shares rose 1.4 percent at 1149 GMT on Tuesday, while Alcatel-Lucent fell 11.2 percent. Reuters reports that Nokia share holders were relieved that Nokia had not overpaid. On the other hand, Alcatel share holders disappointed because they hoped for a part-cash offer.
Similar deals which happened in the past have resulted in problems such as difficulty of cutting costs in an R&D intensive business. However, Nokia CEO Rajeev Suri said that the move will not create a joint venture, hence there will be no “governance issues.”
We will take a no politics, no nonsense approach to running the business, and have learned from past mistakes,” said Suri.
The new Nokia will have about 114,000 employees and combined sales of around 26 billion euros. The deal will be finalized in the first half of 2016.
Nokia suffered huge losses after losing its once-dominant position in the mobile phones market. With revenues and strong position in a slightly different type of industry, the Finnish company may be able to regain its lost spot.