The Finnish company concentrates on the production of network telecommunications equipment

Finnish telecommunications equipment manufacturer Nokia has agreed to purchase its competitor, French company Alcatel-Lucent. The transaction amount will be €15.6 billion ($16.6 billion). The deal is part of Nokia's plan to focus on developing its most profitable telecommunications network equipment division after selling its mobile division.

Photo: Roni Rekomaa/Lehtikuva ATTENTION EDITORS - FINLAND OUT. NO COMMERCIAL OR EDITORIAL SALES IN FINLAND. NO THIRD PARTY SALE, Reuters

According to a statement released today, the Finnish company Nokia has agreed to buy its rival in the production of telecommunications equipment from the French company Alcatel-Lucent. In accordance with the agreement, Alcatel-Lucent shareholders will receive 0.55 shares of the combined company per share, thereby 33.5% of the new company will be in the hands of Alcatel, and 66.5% will belong to Nokia. The transaction amount is €15.6 billion ($16.6 billion). The deal will be completed in the first half of next year. The head of the merged company will be the current CEO of Nokia, Rajeev Suri.

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According to experts, this deal will allow Nokia to more successfully compete with the Swedish Ericsson and Chinese Huawei in the network equipment market. The share of the merged company in the global network equipment market will reach 35%. For comparison: Ericsson has 40%, and Huawei has 20%. Sales of the combined company should amount to €26 billion. Alcatel-Lucent's market capitalization is estimated at €11 billion, Nokia's market capitalization at €28 billion. According to the companies, operating cost savings from the deal will amount to €900 million by 2019. Nokia is not going to cut jobs at Alcatel-Lucent, which currently employs about 6 thousand people.

Nokia sold its mobile division to Microsoft in September 2013 for €5.4 billion. After this, Nokia was left with three key divisions: solutions development and production of telecommunications equipment (NSN), mapping division Here and patent licensing. Last year, the corporation announced that the main focus of its work would be telecommunications equipment, and therefore Rajeev Suri, who had previously headed the NSN division, became the head of the corporation. After the sale of the mobile division, NSN accounts for up to 90% of sales of all Nokia. At the end of last week , unofficial information appeared that Nokia was considering selling the Here mapping service in order to concentrate even more on the production of network equipment.

In the fourth quarter of 2014, the revenue of Nokia's network equipment division increased by 8% over the year and amounted to €3.37 billion. Total sales of the Finnish company for the quarter increased by 9.4%, to €3.8 billion. Company revenue for 2014 the year remained at the level of 2013, amounting to €12.7 billion.

Yana Rozhdestvenskaya

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Nokia bought Alcatel-Lucent for $16.6 billion