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Nokia CEO: Alcatel-Lucent takeover “more about innovation than costs”

Nokia's top executives said on Friday morning that it is too early to discuss possible job losses following the massive buyout of French rival Alcatel-Lucent – a deal some three times larger than Microsoft’s purchase of Nokia’s handset business in 2013.

Risto Siilasmaa ja Rajeev Suri Nokian tiedotustilaisuudessa.
Toimitusjohtaja Rajeev Surin (oik.) johtama Nokia sai Etelä-Suomen aluehallintovirastolta huomautuksen ulkomaalaisten asiantuntijoidensa alipalkkauksesta. Image: Markku Ulander / Lehtikuva

Nokia CEO Rajeev Suri said on Friday morning that the network company’s acquisition of its French rival Alcatel-Lucent is “more about competitiveness and innovation than costs”.

At a press conference at Nokia headquarters in Otaniemi, Espoo, the company’s top executives explained the rationale for Finland’s biggest-ever corporate takeover.

“Nokia is buying Alcatel-Lucent, let’s be clear about that,” added Suri. He and board chair Risto Siilasmaa stressed that this is not a merger of equal companies but rather an acquisition.

The two firms announced this week that they plan to merge in a stock deal worth 15.6 billion euros – some three times as pricey as Microsoft’s purchase of Nokia’s handset business in 2013.

The Finnish company will own nearly two-thirds of the new entity, which is to begin operations next year. The headquarters will remain in Espoo, and both Suri and Siilasmaa will stay in their positions.

Job cuts? Too early to say

Nokia has promised not to cut French jobs for two years after the closure of the deal, beyond what Alcatel had already planned.

"There is nothing extraordinary in the commitment to France, nothing that wouldn't make business sense," said Suri. "When you do deals with France involved, you want to make sure that the government endorses your deal, understands the strategic rationale."

Suri and Siilasmaa said it was too early to talk about possible job losses in Finland. Siilasmaa pointed out that Nokia has some 7,000 employees in Finland while Alcatel-Lucent only has some 6,000 in France, and said there is not much immediate overlap in functions.

"Taking the global scope into account, there are proportionately speaking not that many people in the home countries," he added. Altogether the new firm will have some 114,000 workers worldwide.

Suri said that Finland’s strength is in R&D: “For instance, I think Oulu is the world’s best place, second to none, for radio access engineering,” he said.

Not on wireless alone

Suri denied that Nokia only wanted Alcatel-Lucent’s wireless business, noting that for instance the purchase moves Nokia into cloud technology. He said that Nokia cannot rely on wireless networks alone, but must diversify itself and expand its scope geographically.

“This deal makes us strong in both the US and China. In our sector we have to be in those markets. This is exactly what we need,” said Suri.

“We’re building a company that’s 150 years old, building it for the next 10 or 15 years, not just the next three years,” asserted the 47-year-old Indian, who took over as CEO nearly a year ago.

"Global operators have all made the shift to converge fixed and mobile, and now equipment makers will have to follow suit," Alcatel-Lucent CEO Michael Combes said on Wednesday.

Swedish rivalry

The combined company’s main rival will be Ericsson, which controls some 40 percent of the wireless network equipment sector. This week the Swedish company announced another round of staff reduction at its main R&D centre in Finland.

Analyst firm Gartner says the combined entity will be number-two in market share, just behind Ericsson and ahead of China’s Huawei. It will also exceed both rivals in wireless infrastructure revenue and challenge Ericsson in the Radio Access Network market.

Ahead of the acquisition, Nokia on Monday regained its former position as the most valuable company on the Helsinki Stock Exchange, edging past the Sampo financial group. Its market value rose to 28.4 billion euros, ahead of Sampo’s 27.4 billion, but it has since declined.

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