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Nokia, Siemens to merge some units

(Reuters)
Updated: 2006-06-19 08:44

Nokia and Siemens have agreed to combine the bulk of their telecom equipment businesses to create one of the biggest players in the industry, sending shares in both firms higher.

Jorma Ollila, pictured 23 May 2006, Nokia's chief executive who turned the Finnish industrial group into the world's biggest mobile phone maker, hands over the reins on Thurdsay to his deputy Olli-Pekka Kallasvuo, who has hinted that acquisitions may be in the offing. [AFP]

Analysts put a value of 20 to 25 billion euros ($31.5 billion) on the new business, whose Finnish and German parent companies will exchange no money to do the deal.

The units in the 50-50 venture, "Nokia Siemens Networks", had sales of 15.8 billion euros last year, which would make it the second biggest mobile equipment player and third in fixed infrastructure, the companies said on Monday.

Shares in industrial conglomerate Siemens jumped 8.9 percent to 68.42 euros by 1220 GMT on relief it had found a solution for an operation that has long been a burden.

Nokia gained 5 percent to 16.43 euros as it achieves critical mass for its smaller networks unit.

That business has suffered from fierce price competition, including from new Asian rivals, in the fight for orders from the big telecoms operators in a consolidating industry.

"I think in the longer term it's good. For Nokia, it's size, and size matters when you're talking about the networks services business," said Hannu Rauhala, analyst at Opstock in Helsinki.

He said the deal would allow the companies to grow more quickly in a low-growth market.

"Siemens has a very good position in fixed-line networks, and it offers very good possibilities when you are talking about convergence."