Nokia Launches $16.6 Billion Offer for Alcatel-Lucent
November 18 2015 - 7:30AM
Dow Jones News
HELSINKI—Finnish wireless-equipment specialist Nokia Corp. on
Wednesday commenced its share-exchange offer for Alcatel-Lucent SA
shareholders in Paris and New York, betting its â,¬15.6 billion
($16.6 billion) acquisition will allow the new company to better
compete in a global race for scale in the business of making
telecommunications and Internet gear.
Nokia's attempt to create a one-stop shop for telecom companies
and Internet service providers comes as the company faces
heightened competition from new players such as China's Huawei
Technologies Co. Longtime Nordic rival Ericsson AB of Sweden,
meanwhile, announced earlier this month it was forging an alliance
with Cisco Systems Inc., to create another broad ensemble in many
of the same businesses.
Nokia Chief Executive Rajeev Suri, in an interview, said the
Ericsson-Cisco tie-up—short of the full-blown merger upon which
Nokia and France's Alcatel-Lucent are embarking—was a sign that his
move was the right one to take.
"That announcement is a validation of our strategy," he
said.
Like Ericsson, Nokia has been under pressure to diversify its
revenue stream beyond its core customers, largely telecom
operators, and toward big companies outside that sector, like
airlines, oil companies and car makers, as well as police and
emergency services—all of which are looking for new hardware and
software to do everything from better connecting their operations
to enabling real-time emergency response.
After falling behind and ultimately surrendering in the
smartphone arms race, Nokia spent recent years slashing costs and
selling off assets, including its once legendary mobile-phone
business, to specialize in wireless networks.
Now, it is widening its portfolio again, adding Alcatel-Lucent's
stable of products, such as routers and switchers that are used to
create networks.
Mr. Suri, whom Nokia elevated to the top job after selling its
phone business to Microsoft Corp. in 2014, said the Nokia "wireless
only" strategy was a temporary plan aimed at repairing a company
that was saddled with many uncompetitive businesses.
"We had a lot of businesses which were massively subscale," he
said.
Nokia's all-share bid Wednesday for Alcatel-Lucent has been
cleared by antitrust authorities. If enough Alcatel-Lucent
shareholders tender their shares, the deal will be contingent only
on Nokia shareholders approving it, both of which is expected.
The Nokia-Alcatel-Lucent deal and the Ericsson-Cisco pact come
as these and other network providers struggle to stay strategically
relevant in a world where fixed-line telecom networks, mobile
networks and cable are converging, and where telecom operators are
consolidating.
"This market is converging rapidly, much faster than you think,
and in order to serve operators that are becoming more and more
converged, you need to have a portfolio that is end-to-end," Mr.
Suri said.
Previous mergers in the networks business have stumbled,
including the merger that created Alcatel-Lucent in the first
place, in 2006, and the joint venture between Nokia and Siemens AG
that created Nokia Siemens Networks in 2007. Mr. Suri ascribed that
to poor timing.
"When those deals came, the road maps [for so-called 4G, the
latest wireless-network technology] were already on the way—they
were too late," he said. In contrast, Mr. Suri said, the big deals
being made this year are timely: A big chunk of investments for the
next generation of networks, known as 5G, will come next year.
5G is expected to drive what is known as the Internet of Things
and a host of other services that 4G will be unable to do, due to
its latency limits and significantly higher demands for real-time
data transfer.
"We will be able to have one converged 5G offering rather than
each of us building our own 5G network and then having to align
them if we consolidated in two years," Mr. Suri said of Nokia and
Alcatel-Lucent. "We are just ahead of the curve."
Write to Jens Hansegard at jens.hansegard@wsj.com
Access Investor Kit for "Siemens AG"
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0007236101
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 18, 2015 07:15 ET (12:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.