Nokia Preps JV Future in China
As part of its planned €15.6 billion (US$17.6 billion) acquisition of Alcatel-Lucent, Nokia is to merge its business unit in China with Alcatel-Lucent Shanghai Bell. (See Nokia Makes €15.6B Bid for Alcatel-Lucent.)
The move will create a new joint venture with annual revenues (in 2014) of €4.5 billion ($5 billion) that will be half-owned by China Huaxin, a Chinese government company with which Nokia has signed a memorandum of understanding (MoU).
The resulting company will compete with the likes of Huawei and ZTE, as well as the local operating unit of Ericsson, for the high-value network expansion and upgrade contracts awarded by China's three main operators, which are undergoing some upheaval themselves. (See All Change in China? and ZTE Profits Rise on China's 4G Boom.)
Alcatel-Lucent Shanghai Bell is a long-standing joint venture between AlcaLu and state-owned China Huaxin, in which Alcatel-Lucent owns 50% plus one share. In 2014, it generated revenues of nearly €3.1 billion ($3.5 billion).
Once Nokia has completed its acquisition of AlcaLu, it has agreed to fold its Nokia China business unit, which generated revenues of nearly €1.4 billion ($1.6 billion) in 2014, into Alcatel-Lucent Shanghai Bell to create a new joint venture with China Huaxin called Nokia Shanghai Bell, in which Nokia will own 50% plus one share.
Nokia says it will receive unspecified "fair value compensation" for adding its "relevant assets" to the joint venture.
With China's three major operators investing heavily in fixed and mobile broadband access networks, there are significant deals to be won. Separately, Nokia and Alcatel-Lucent Shanghai Bell have been winning decent business in China during the past year. (See AlcaLu Lands $1B+ Deals in China, AlcaLu Lands 'Top 3' 4G Deal at China Telecom and Nokia Sees Off Non-Chinese Rivals for China Telecom 4G Work.)
— Ray Le Maistre, , Editor-in-Chief, Light Reading