Nokia claims it will become the second-largest provider of networking hardware, software and services to communications service providers globally if its acquisition of Alcatel-Lucent is completed.

In a market that is increasingly about scale, that's not a claim to be dismissed, even though such a ranking is dependent on multiple moving parts, including foreign exchange rates, and is based on last year's numbers. But it is reflective of how big the "new" Nokia will be should it be successful in its efforts to swallow AlcaLu.

The Finnish vendor's CEO Rajeev Suri, who will be the CEO of the new enlarged Nokia (which will drop the names Alcatel and Lucent altogether), noted during a conference call early Wednesday that the combined 2014 revenues of Nokia Corp. (NYSE: NOK) and Alcatel-Lucent (NYSE: ALU) from telecom carrier customers was €25 billion ($26.5 billion), just behind Ericsson AB (Nasdaq: ERIC) and ahead of Huawei Technologies Co. Ltd.

Figure 1: (Reproduced with permission from Nokia)

"We have the building blocks to make this a success," said Suri during the conference call. "Both Alcatel-Lucent and Nokia Networks have worked hard on developing the right operating model" during the past few years, with both companies having turned around seemingly dire situations into positions of relative strength and growth. "This is a unique opportunity to create an innovation leader … to offer a seamless portfolio of products, software and services."

"This is not a combination that is starting from a position of weakness," added Suri, seeking to distance this consolidation process from the combinations of Nokia and Siemens Communications and of Alcatel with Lucent. "We are starting from a position of strength. This is not a joint venture. That enables us to have no politics and a no-nonsense approach to running the business," stated Suri.

According to Nokia, the combined operations would give the post-merger vendor a market leadership position in 4G LTE, fixed broadband and a number of key core network capabilities (IMS/VoLTE, customer experience management, device management, subscriber management), plus a number-two position in IP routing and services (professional services, network integration, customer care).

Looking ahead, the vendors also noted that they have a strong position in SDN and NFV with Alcatel-Lucent's Nuage Networks operation and CloudBand platform, developments related to IoT and plans to create a 5G R&D center of excellence in France.

The process of combining the two companies, though, will involve some rationalization, and the nominal carrier market ranking cited by Suri is based on the full portfolios of both companies.

So what will stay and what will go? That is yet to be determined, at least publicly. Suri noted that a standalone integration team would be appointed by the end of this week to figure out how the two companies can be combined to optimum effect. Having a separate team to focus on that task will also minimize distraction and interference with the ongoing businesses of both Nokia and Alcatel-Lucent.

Based on the rationalization process that Nokia has gone through in recent years, "I know what not to repeat," stated Suri. "We will hit the ground running. There will be a separate team to focus on integration and the regular team to run the business today. We will be extremely vigilant."

Alcatel-Lucent CEO Michel Combes added that there will be no halt called to current business activities or to AlcaLu's Shift Plan rationalization program. "We will continue to focus on momentum and to be ambitious. Expect us to remain extremely strong," he said during the call.

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At the heart of any portfolio discussions will be the combined wireless network equipment portfolio. Nokia clearly admires at least some of Alcatel-Lucent's mobile infrastructure portfolio but quite what will be retained from each company's current portfolio is yet to be determined.

There will also need to be a great deal of planning around the integration of the two vendors' service provider IT assets, particularly the OSS platforms and systems related to cloud and virtualization management, as noted by Heavy Reading analysts Tuesday. (See Nokia + AlcaLu: What the Analysts Say.)

Suri suggested that technology integration is a slightly easier task these days thanks to open interfaces, LTE and cloud technologies, though that suggestion might raise a few eyebrows amongst operators that continue to battle multi-vendor interoperability issues.

Across much of the combined business, though, there is no overlap and it will be a case of adding product lines from Alcatel-Lucent's optical transport, IP routing and fixed access units into the mix. That will help Nokia meet the needs of many more operators, as its recent strategy has been focused on mobile network infrastructure.

"We needed a strong position in fixed networks and IP routing. Only about 30% of operators are pure play mobile," noted Suri. Ultimately, "there will be one network for everything," with fixed and mobile capabilities integrated, he added.

Nokia's current IP routing capabilities come from its partnership with Juniper Networks Inc. (NYSE: JNPR), so what does the future hold for that relationship? "We will prioritize our portfolio over time," stated Suri, signaling an (expected) end to the ties with Juniper, "but we have yet to enter into partnership discussions." [Editor's note: We think Juniper may have read between the lines…]

They key question now is whether the combined customer base of Nokia and Alcatel-Lucent think this combination is a good idea. Naturally, everyone at the two vendors is saying there is unanimous support for the acquisition, both internally and externally. "I have had personal discussions with the three main carriers in the US, which are all supportive to this transaction," said Combes.

— Ray Le Maistre, , Editor-in-Chief, Light Reading