Nokia Confirms Plans To Acquire Alcatel-Lucent For $16.6B

Nokia Wednesday confirmed its plans to acquire rival Alcatel-Lucent in an all-stock deal that's valued at $16.6 billion.

"Together, we expect to have the scale to lead in every area in which we choose to compete," said Rajeev Suri, president and CEO of Nokia, in a statement. "Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services."

The agreement between Finnish telecommunications equipment maker Nokia and its France-based competitor is expected to be completed in the first half of 2016 and save around $1 billion in operating costs for the new company by 2019 through restructuring, according to a joint release Wednesday. The new company, to be called Nokia Corporation, plans to accelerate the development of technologies such as 5G, software-defined networking, cloud and analytics, said the release.

[Related: Nokia Acquisition of Alcatel-Lucent? Partners Cautiously Optimistic]

David Carissimi, COO of Icon Voice Networks, an Irving, Texas-based solution provider and Alcatel-Lucent partner, said he doesn’t believe the acquisition will drastically change Alcatel-Lucent's current channel and could benefit partners down the line.

"I don't see anything but good for Alcatel-Lucent moving forward because this infuses a tremendous amount of cash into their company and props up their share values," said Carissimi. "It's not like Nokia is a no-named company, and I would venture to guess that [Alcatel-Lucent] is a very, very strategic portion of Nokia's 10-year plan going forward."

Nokia said in the release that it is reviewing whether to keep its Here mapping and navigation business but intends to retain Alcatel-Lucent's Bell Labs to host its network-focused innovation activities.

"Bell Labs was probably a big reason for [the acquisition]; there is a massive portfolio for patents there … industry-changing types of things," said Icon Voice Networks' Carissimi.

The new company will consist of around 114,000 employees with combined sales of $27.6 billion between the two companies in 2014, according to the release.

"As things come together, Nokia/Alcatel-Lucent looks clearly positioned to be No. 2 behind Ericsson and ahead of Huawei’s telco business, but they clearly have the potential to grow and become the No. 1 ahead of Ericsson since they're so very close already," said Elisabeth Rainge, vice president of communications service provider operations at research firm IDC, in an interview with CRN. "In terms of the sales to telecom operators, they come out almost exactly equal to Ericsson. Ericsson revenues are around $25 million euros and Alcatel-Lucent and Nokia combined is around $25 million euros."

Nokia is offering Alcatel-Lucent shareholders 0.55 of a share in the combined company for each of their old shares, according to the release.

"A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications," said Michel Combes, CEO of Alcatel-Lucent, in a statement. "The global scale and footprint of the new company will reinforce its presence in the United States and China."

Due to Alcatel-Lucent's strong relationships with companies like Verizon, AT&T and Sprint, the new Nokia is going to have additional exposure to the North American market, something it previously lacked, according to Rainge.

PUBLISHED APRIL 15, 2015