Nokia and Siemens to Merge Phone Networks

Nokia and Siemens have announced a deal to create one of the world's largest communications firms by merging their mobile and fixed-line networks.

At this week’s Nokia Connections 2006 conference in Singapore, Nokia and Siemens announced plans to create Nokia Siemens Networks, a new company in which they will each hold a 50 percent stake. Nokia Siemens Networks will merge the fixed-line and mobile networks and offer a “quadruple play” of products and services (data, phone, television, and mobile) which the companies anticipate will generate some $20.2 billion in sales by 2010, along with an annual cost savings of nearly $1.9 billion by the same date. Expect that “cost savings” to include layoffs and “encouraged” retirement of employees whose positions are made moot by the merger. The new company will be worth nearly $30 billion and be based in Nokia’s home turf of Finland.

The move is the latest in a consolidation trend in the telecommunications industry throughout Europe, following a partnership between U.S.-based Lucent and French phone equipment maker Alcatel. Nokia’s executive vice president and general manager of networks Simon Beresford-Wylie will become CEO of the new enterprise.

“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,” said Klaus Kleinfeld, CEO of Siemens. “This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability.”

Analysts see the move as a way for Nokia to become a meaningful player on the network side of the telecommunications business