Nokia made business history in Finland on Wednesday by announcing its intention to purchase its telecom equipment competitor, the US and French-owned firm of Alcatel-Lucent. The 15.6 billion euro price tag makes it the largest corporate acquisition in Finnish history, even if no real money will exchange hands in the all-share deal.
The sum is unprecedented; especially when you consider that the September 2013 deal to sell Nokia’s mobile phone business to Microsoft had a cost of 5.4 billion euros, about one-third the value of Nokia’s deal announced in April 2015.
Both Nokia and Alcatel-Lucent enjoyed revenue of about 13 billion euros before the merge. The new company will therefore boast sales of 26 billion euros, or half the Finnish state budget.
“The new Nokia Corporation will be a real world-class player in next generation technology. It will grow a lot more muscle with a deal like this,” says Toni Nygrén, an analyst with the IT research company Gartner.
Good news for the Swedes too
The merger will also shoot the new company into number two status in the world, right behind Sweden’s Ericsson.
“The corporate buyout will push Nokia past the Chinese Huawei brand to stand alongside the market leader Ericsson,” says Nygrén.
Nygrén says news of the merger isn’t just great news for Finland, but great news for Ericsson, too – at least at first.
“Ericsson’s competitive ability will get a boost for a spell while Nokia and Alcatel-Lucent concentrate on their transition to one company. It is also good news because there is now one less competitor out there on the network market. It may just make price levels healthier,” he says.