Nokia and Siemens joint venture
Earlier this month, Finland-based Nokia and Germany-based Siemens announced the merger of their phone equipment operations. The new entity, to be called Nokia Siemens Networks, will be a 50-50 joint partnership, It becomes the #3 company in the communciations equipment business worldwide, with revenues over $30 billion.
Slightly bigger are Sweden's Ericsson and France's Alcatel. Both have grown through recent mergers. Last October, Ericsson bought out Marconi Corp.'s Internet and telecom operations. In April, Alcatel launched a $13.4 billion stock swap to acquire US-based Lucent Technologies Inc. Doubtless, the previous mergers had Nokia and Siemens management thinking they could not stand still.
The new company is targeting the emerging "quadruple play" segment, where able TV, fixed-line telephone, cell phones, and Internet equipment. Nokia's strength in wireless technology will be complemented by Siemens strength in wired networks.
According to an article on VOIP News.com ("Nokia and Siemens Merge Service Provider Business". 6/19/06) the new company will be a leader in a number of categories:
"Based on current market share data, Nokia Siemens Networks will be the second largest global company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market."
Aside from the above mentioned firms, other players in this changing market are China's Huawei, US-based Motorola, and Canada's Nortel. Most experts expect that those last two companies may have to seek some kind of deal with another company to stay in contention. One analyst is quoted at MarketWatch.com ("Nortel, Motorola pressed after Siemens-Nokia deal," 6/19/06) as saying: "Given Motorola and Nortel now appear to lack telecom infrastructure scale vs. key competitors, we expect both vendors to look at strategic alternatives for these businesses."
Mergers and acquisitions create anxiety and panic, which creates more mergers and acquisitions.
One key factor in the merger has to be the consolidation of telephone services worldwide, as most countries are moving to just a few telecom/Internet suppliers, and as those suppliers are more and more moving to the quadruple play market. With few buyers (an oligopsony), the sellers have to join forces to restore balance in the market and survive.
