Nokia and Siemens to merge their mobile networks

Merger expected to go through before January 2007

19 June 2006 12:22 GMT / By Amber Maitland

Two of the mobile phone industry's top players have announced that they are merging their services and products to better compete with other carriers and manufacturers.

Nokia's Networks Business Group and Siemens' carrier-related operations are to go ahead in a 50-50 joint venture called Nokia Siemens Networks. Their combined pro forma revenues totalled €15.8 billion in the 2005 calendar year, so the new company is set to become a considerable force to rival Sony Ericsson.

"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", said Klaus Kleinfeld, CEO of Siemens.

"This combination creates a leading industry player with immediate strength, excellent potential for growth, and well-positioned to improve future profitability."

Once the merger goes through, the companies predict they will have to make 10 to 15% of their 60,000 strong workforce redundant as part of an initial headcount adjustment in the first 2 years.

They also predict that the cost synergies will total €1.5 billion by 2010, helped in part by the elimination of overlapping functions, reduction of overhead costs, and greater efficiencies in research and development.

Simon Beresford-Wylie, currently Executive Vice President and General Manager of Networks at Nokia, will become the chief executive officer, while Peter Schoenhofer, currently a member of the executive board of Siemens AG Austria will take over as chief financial officer.

The deal is expected to go through by 1 January 2007.