Nokia To Buy Alcatel-Lucent In €16.5bn Deal

Nokia (Swiss: NOK1V.SW - news) is to buy Alcatel (Paris: FR0000130007 - news) -Lucent in a €16.5bn deal in an apparent bid to take on Ericsson (Xetra: ERCA.DE - news) and become the world's leading telecoms equipment firm.

The all-share transaction, which has the support of the French government, will create a combined company with more than 110,000 staff and give it a 35% share of the mobile equipment market.

Alcatel-Lucent, which has been loss-making since its creation in 2006 through the merger of France's Alcatel and US-based Lucent Technologies, will have 33.5% of the new company with its investors netting 0.55 shares for each of their old shares.

Nokia will control the remaining 66.5%.

The Finnish firm, which has turned around its fortunes since the sale of its handset business to Microsoft (NasdaqGS: MSFT - news) , now concentrates its work in three key areas of networks, mapping services and technologies and patents.

The sector is facing weak growth prospects and pressure from low-cost Chinese players Huawei and ZTE (Xetra: A0M4ZP - news) .

The combined company will be known as Nokia and be based in Finland with "a strong presence in France," Nokia said.

Nokia CEO Rajeev Suri was upbeat on the takeover, saying he firmly believed it was "the right deal, with the right logic, at the right time."

But analysts warned that their operations crossed over in some areas and the merger likely would cause layoffs and cuts.

Nokia is known to employ 800 staff in the UK and Alcatel around 1,000 after already cutting 300 roles at three sites last year.

Nokia shares rose 3% at the opening of trading on Wednesday while Alcatel-Lucent fell 11%.