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Nokia Acquires Alcatel-Lucent, Integration to Start Soon

Nokia Networks, a division of Nokia Corp. NOK has finally gained control of Alcatel-Lucent SA ALU. In Nov 2015, Nokia Networks had filed with French stock market regulator AMF, its public exchange offer for all the outstanding ordinary shares, American depositary shares (ADS) and OCEANE convertible bonds of Alcatel-Lucent.

According to the figure published by the French stock market regulator Autorité des Marchés Financiers (AMF), assuming conversion of convertible bonds tendered at the approved ratio, Nokia will hold 79.32% of Alcatel-Lucent's share capital and at least 78.97% of its voting rights. The AMF is due to publish the final results today and the tender offer will be reopened in France and in the U.S. within the next 10 days.

Nokia suggested remaining Alcatel-Lucent securities holders to tender their shares, ADSs and convertible bonds to become eligible for its planned capital returns programme. Nokia already has the approval of its own shareholders, as well as those of Alcatel-Lucent and all necessary regulatory permissions from the countries where either of these entities currently operates.

Nokia expects the integration process to begin from Jan 14, 2016. The deal was valued at € 15.6 billion (approximately $16.6 billion). Nokia estimates annual cost synergies of €900 million by 2018. Several analysts have forecasted that the combined entity will command about 35% of the global wireless infrastructure market share, close to LM Ericsson’s ERIC estimated 40% hold and far ahead of Huawei Technologies Co. Ltd.’s 20% share.

The acquisition of the wireless business of Alcatel-Lucent will significantly strengthen Nokia’s foothold in North America.  Leading U.S. telecom operators, namely, Verizon Communications Inc. VZ and AT&T Inc. T are prominent customers of Alcatel-Lucent. Notably, in 2014, the wireless division of Alcatel-Lucent had generated around $5 billion in sales. Of the total, Verizon and AT&T jointly contributed more than 25%. Additionally, Alcatel-Lucent has a strong presence in China while Nokia enjoys considerable dominance in Europe and Asia. 

The merged entity can effectively capitalize on the emerging Internet-of-Things (IoT) platform and offer competent triple-play voice, video and data solutions across the world. The core focus areas will be next-generation 5G wireless technology, IP and software, defined networking, cloud-based solutions, big data analytics, and sensors and imaging.

The takeover of Alcatel-Lucent by Nokia will create a network solutions behemoth in the industry with a significant global customer base and solid operational efficiencies. Nokia boasts strong technical expertise in professional managed services and customer experience management apart from a rich portfolio of mobile broadband infrastructure and 4G LTE network.

On the other hand, Alcatel-Lucent enjoys relative advantage in IP-based products, optical networking, cloud computing/software-defined networking, fixed broadband network and professional services.

Nokia currently carries a Zacks Rank #3 (Hold).

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