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Nokia, Siemens marriage sparks more merger talk

Posted: 01 Aug 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Christoph Hammerschmidt? Loring Wirbel? merger? Nokia? Siemens AG?

The telecom industry was rife with speculation about more mergers after the news that Nokia and Siemens AG will combine their telecommunications infrastructure-related businesses to form a $20 billion venture. A round of consolidation involving Motorola, Nortel and China's Huawei is possible, according to industry watchers.

The goal of the Nokia-Siemens deal is to achieve scale advantages and synergies, the companies said. It is also another move to restructure Siemens' poorly performing communications business. Telecom Trends International Inc. estimates that the formation of Nokia Siemens Networks will propel the new company into the No. 2 role in mobile infrastructure, with a 23.7 percent market share, following LM Ericsson at 25.9 percent. The company predicted that following Ericsson's acquisition of Marconi Communications and the Alcatel-Lucent merger, Motorola and Nortel will be forced into a merger or alliance if they want to survive in the new competitive environment of wireless infrastructure.

Michael Howard, principal analyst and co-founder of Infonetics Research, said that a major impetus for equipment makers to merge is the emergence of low-cost Chinese manufacturers like Huawei Technologies Co. Ltd and ZTE Corp. "In the end, profitability and a lower cost of operations will rule," he said.

There is very little overlap between Nokia and Siemens, said Richard Webb, director of wireless broadband and mobile analysis at Infonetics. Nokia's "A-list" presence in 3G services will be augmented by Siemens' strong core-networking wireline business, he said.

- Christoph Hammerschmidt, Loring Wirbel
EE Times

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