Combined operations began in January 2016
In 4Q15, Nokia (NOK) received overwhelming approval from its shareholders for the Alcatel-Lucent (ALU) acquisition. Nokia’s CEO (chief executive officer) Rajeev Suri stated, “We believe that we are getting close to the 95% squeeze-out level.” He went on to say, “While we still continue to work to acquire full ownership of Alcatel-Lucent, combined operations already began in early January, and the integration work is off to a strong start.”
Nokia said it will complete the deal faster than expected and wants to ensure that the integration proceeds with minimal disruption. It’s also confident that it will achieve its previously announced synergy target.
The deal will allow Nokia to increase spending on 5G (fifth generation). The combined portfolio will also help as the company’s transition to cloud accelerates.
Synergy of 900 million euros annually by 2019
In April 2015, Nokia (NOK) agreed to acquire Alcatel-Lucent (ALU) in an all-share transaction that values the deal at $16.6 billion. The companies stated that the merger will help them cut 900 million euros of operating expenses on an annual basis by 2019. Nokia was justifying the 28% premium it paid on Alcatel-Lucent’s average stock price over the last three months to acquire the company.
The deal will make Nokia an even bigger European (EFA) wireless equipment player. Nokia has been lagging behind Ericsson (ERIC) and China’s (FXI) Huawei in this market. The merger should make Nokia the second-largest player.
In the past, Alcatel-Lucent has managed to get contracts with China’s major telecom providers to provide its 7950 XRS (Extensible Routing System) core router. These providers include China Mobile, China Telecom, and China Unicom. Alcatel-Lucent took advantage of Cisco’s (CSCO) relatively weak position in China.
China is a good opportunity for networking players because it has rolled out its 4G (fourth-generation) LTE (Long-Term Evolution) network. According to a report from GSMA Intelligence, and as the above chart shows, the total number of 4G LTE connections around the world should increase from 0.4 billion in 2014 to 2.5 billion in 2020.