Features

The Birth of Nokia Siemens Networks

By Dilip Thomas

Nokia and Siemens are merging their communications service provider businesses in a bid to create a new global network leader for fixed-mobile convergence. The new merger, with 2005 calendar year pro forma revenues of EUR 15.8 billion, will be a 50-50 joint venture to consist of Nokia's Networks Business Group and Siemens' carrier-related operations for fixed and mobile networks. The estimated cost synergies from the merger is expected to be in the region of EUR 1.5 billion annually by 2010.

Headed by Simon Beresford-Wylie, proposed chief executive officer, and Peter Schцnhofer, proposed chief financial officer, Nokia Siemens Networks is expected to have one of the world's best research and development teams with the ability to invest in next generation fixed and mobile product platforms and services. The new company will have a world-class fixed-mobile convergence capability, a complementary global base of customers, a deep presence in both developed and emerging markets, and one of the industry's largest and most experienced service organizations.

"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," said Olli-Pekka Kallasvuo, CEO of Nokia. "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," 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."

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. The company's 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.

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. 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.

Nokia Siemens Networks will have its operational headquarters in the Helsinki, Finland metropolitan area, and have strong regional headquarters in Munich, Germany, where three of the future five divisions of the new company will be based. The transaction closing is expected to take place before January 1, 2007 and is subject to customary regulatory approvals.


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