MUMBAI: Nokia Oyj and Siemens AG have announced that they intend to merge the Networks Business Group of Nokia and the carrier-related operations of Siemens into a new company, to be called Nokia Siemens Networks. The 50-50 joint venture will target strong positions in important growth segments of fixed and mobile network infrastructure and services.
Both Nokia and Siemens expect the impact of the partnership on their respective EPS, on a pro forma basis excluding the restructuring charges, to be accretive by the end of 2007, assuming a closing by 1 January. This is subject to customary regulatory approvals, the completion of standard closing conditions, and the agreement of a number of detailed implementation steps. After closing, the financial results of Nokia Siemens Networks will be consolidated by Nokia and accounted for at equity by Siemens.
Nokia CEO Olli-Pekka Kallasvuo will serve as chairman of Nokia Siemens Networks, while Nokia Networks EVP and GM Simon Beresford-Wylie will assume the position of chief executive officer immediately upon the closing of the merger.
Nokia Siemens Networks will have its operational headquarters in the Helsinki, Finland metropolitan area, and have headquarters in Munich, Germany, where three of the future five divisions of the new company will be based.
Nokia Siemens Networks‘ 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 tailored for emerging market operators.
"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," says Nokia CEO Olli-Pekka Kallasvuo. "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." Olli-Pekka Kallasvuo will 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," says Siemens CEO Klaus Kleinfeld. "This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability."
Based on the 2005 calendar year, the combined company had EUR 15.8 billion in pro forma annual revenues and is expected to start operations with 60,000 employees. Based on current market share data, it will be the second largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market, adds the official release.
The estimated cost synergies of EUR 1.5 billion annually by 2010 are expected to come primarily from the elimination of overlapping functions, consolidation and better utilization of sales and marketing organizations, reduction of overhead costs, sourcing benefits, and greater efficiencies in R&D.
A substantial portion of these synergies is expected to be realized in the first two years, according to Nokia. These changes are expected to result in a headcount adjustment over the next four years in the range of ten to fifteen percent from the initial combined base of approximately 60,000. Detailed headcount reduction assessments will be made as part of the integration planning process and subject to required consultation with employee representatives, says the company release.
