Nokia to buy Alcatel-Lucent for $16.6B, eyeing global market

After increasing speculation on a possible buyout, Finnish communications and IT giant Nokia has confirmed that it has finalised a deal to buy Alcatel-Lucent in a share deal worth 15.6 billion Euros ($16.6 billion). If shareholders offer their tick of approval, the deal is set to be finalised by the first half of 2016.

Under the "memorandum of understanding," Nokia and the French-based telecommunications company Alcatel-Lucent are expecting to realise millions in "operating cost synergies" from reduced overheads, "organizational streamlining [and] rationalisation of overlapping products." The combined company is expected to have its headquarters in Finland, though the business will maintain major R&D centres in France.

Nokia has also used the occasion to announce that it is considering the sale of its Here mapping business, with the Finnish company conducting "a review of strategic options" for the business, which "may or may not" lead to a sale.

Both Nokia and Alcatel-Lucent are looking towards an increased global presence under today's deal, with a focus on the US and Chinese markets and growth in Europe. Nokia President and CEO Rajeev Suri described the arrangement as "the right deal, with the right logic, at the right time."

"Our innovation capability will be extraordinary, bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs," Suri said. "We will continue to combine this strength with the highly efficient, lean operations needed to compete on a global scale."

Similarly, Alcatel-Lucent CEO Michel Combes said the deal would bring the financial strength and critical scale" need to become a "global leader" in technology.

"This transaction comes at the right time to strengthen the European technology industry," he said. "We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand. The global scale and footprint of the new company will reinforce its presence in the United States and China."

Nokia and Alcatel-Lucent were forced to respond to increased speculation about the deal as recently as yesterday, releasing a joint statement saying "there can be no certainty at this stage that these discussions will result in any agreement or transaction."

Both Nokia and Alcatel-Lucent declined to comment further following the acquisition news.

Now the two companies, which have long been household names in the mobile phone space, have embarked on a new path towards becoming a joint company targeting a future in fixed and mobile broadband, cloud services and the enterprise market.

Updated April 16 at 10:15 a.m. AEST: Included details on further comment from Nokia.