Nokia, Siemens Get OK From EC

Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE) are on course to create their infrastructure joint venture, Nokia Siemens Networks, before the end of this year, after gaining regulatory approval from the European Commission today. (See EC Approves NSN, Nokia, Siemens Create Networks Giant, and There's a New Bully on the Block.)

In a statement released today the EC concluded "that the transaction would not significantly impede effective competition in the European Economic Area (EEA)," even in the mobile infrastructure market, where the joint venture will be the world's second largest player.

The EC noted that "despite the considerable market shares the merged entity would have in the mobile network equipment sector, the market structure would remain competitive. A sufficient number of credible competitors would remain in the market," namely Ericsson AB (Nasdaq: ERIC) and a combined Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU).

A Siemens spokesman says the EC's decision marks the final major regulatory hurdle for the 50-50 joint venture, which now has antitrust clearance from both Europe and the U.S. He added that, while clearance from a number of unspecified countries is still required, Nokia Siemens Networks is set to be created before the end of 2006 and become fully operational on January 1, 2007.

The joint venture, announced in June, will have annual revenues of €15.8 billion (US$20.2 billion), and hold a 25 percent share of the global mobile infrastructure market, second only to Ericsson's 30 percent. In the GSM/UMTS sector, the joint venture will command about 32 percent of the global market, behind Ericsson's near 40 percent.

It will also be the world's third largest fixed infrastructure vendor, according to the two firms. Prudential Equity Group LLC analyst Inder Singh believes the new company will have a "material presence" in three fixed sectors -- optical equipment (about 7 percent share), DSLAMs (about 9 percent), and carrier VOIP systems (about 15 percent).

Siemens also has a position in the hot IPTV market, while both companies have been making headway with their IP Multimedia Subsystem (IMS) offerings. (See Siemens Leads Report , Siemens Touts Dutch IPTV, Vendors Unite for IMS Pitch, and Globe Deploys Nokia Softswitch.)

The new company will be headed by two Nokia executives -- Olli-Pekka Kallasvuo will be chairman, while Simon Beresford-Wylie will be CEO. The two companies have already agreed on many of the leading executive positions. (See Nokia Siemens Names More Execs and Nokia Execs Dominate JV's Top Table.)

Nokia Siemens Networks, which is expected to attract a market valuation of between €20 billion and €25 billion ($25.6 billion and $32 billion) once formed, does not include Nokia's handset business or the enterprise division of Siemens Communications Group .

As the EC was expected to clear the merger, the news had little impact on the vendors' share prices. Nokia is up 9 cents, about 0.5 percent, to $19.74 on the New York Stock Exchange (NYSE) , while Siemens AG is down 52 cents, again about 0.5 percent, to $96.00.

The news comes as Alcatel and Lucent prepare to face questions from the House Armed Services Committee of the U.S. Congress on Tuesday about the potential security implications of their planned marriage. (See Alcatel, Lucent Face Security Grilling.)

— Ray Le Maistre, International News Editor, Light Reading

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