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Nokia's purchase of Alcatel-Lucent gets the green light in Europe

The $16.6 billion deal will see the companies combine their networking and telecoms strengths.

Nokia CEO Rajeev Suri (left) has a laugh with Alcatel-Lucent CEO Michel Combes. Kenzo Tribouillard/AFP/Getty Images

Nokia is a step closer to buying Alcatel-Lucent.

The Finnish maker of network equipment and former phone fabricator has received approval from the European Commission to acquire the French telecoms company in a deal set to be worth €15.6 billion (around $16.6 billion, AU$23 billion or £11 billion).

A deal would marry two of the largest network equipment manufacturers in the world and better position the combined company to compete against market leaders Ericsson and Huawei. It would also mark the curious return of Nokia to the centerstage of the telecom world, albeit in a radically different form.

Nokia was once the largest phone manufacturer in the world, but fell behind in the age of smartphones. Nokia sold its phone manufacturing division to Microsoft in a $7.2 billion deal in 2014, taking the 150-year-old company out of the phone market for the first time in decades. Instead, it refocused itself on network equipment -- the gear powering our cellular and business networks -- reacquiring the Nokia Siemens Networks assets it previously shed in 2013 and now taking over Alcatel-Lucent.

The Nokia brand is still well-known among consumers -- in Europe and many emerging markets in particular -- and the company is planning to license its name to get back in the game. Although you can buy Alcatel-branded phones, that's a separate business owned by Chinese vendor TCL, so this isn't a step towards Nokia making phones again, as the two companies are primarily looking to combine their networking and telecoms skills.

The focus will be on intellectual property, cloud and ultra-broadband access networking technology. "Our innovation capability will be extraordinary," said Nokia CEO Rajeev Suri, announcing the deal in April this year. "Bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs, we will continue to combine this strength with the highly efficient, lean operations needed to compete on a global scale."

The EC concluded that the deal did not raise competition concerns as Nokia is stronger in Europe while Alcatel-Lucent is a bigger player in North America.

The deal "represents further consolidation in the network infrastructure market and reflects the intense competition in this area, most notably from China-based Huawei," said Ben Wood, an analyst at CCS Insight.

But it won't all be smooth sailing.

"Bringing Alcatel-Lucent into Nokia is arguably the biggest challenge faced by CEO Rajeev Suri," Wood said. "There are obvious technical hurdles that will need to be overcome but the hardest element will be the cultural aspects of the transaction."

Nokia's acquisition of Alcatel-Lucent has now been approved by various countries, including Canada and Russia, and the antitrust review period has expired in the US. The deal now needs to be cleared by Nokia shareholders and is expected to close in the first half of 2016.

Shorn of its loss-making mobile phone business, Nokia also owns the Here mapping service in addition to network equipment. Reports say car-related brands like Daimler, BMW, Volkswagen, Audi and Uber have considered buying Here.