Nokia, Former Alcatel Lucent Combine China Assets

(Beijing) — Telecom giant Nokia Corp. said it has formed a new joint venture that will combine its China assets with those of former French-American rival Alcatel Lucent SA, as the pair pool operations in various global markets after their own megamerger.

Nokia will partner with Huaxin Post & Telecommunication Economy Development Center in the new joint venture, with Nokia holding a majority stake, Nokia said on Thursday. The deal will combine Alcatel-Lucent Shanghai Bell Co. Ltd. with Nokia’s own China business, in a joint venture to be called Nokia Shanghai Bell.

Following the venture’s formation, Nokia Shanghai Bell will become the Finnish company’s sole platform in China for development of new products. Nokia said it expects the deal to close in July.

Nokia and Alcatel Lucent first announced their merger two years ago, but the complex $16.6 billion deal didn’t actually close until November. When that happened, Nokia said it expected to realize 1.2 billion euros ($1.3 billion) in annual cost savings by 2018, largely by achieving greater economies of scale and eliminating overlapping areas.

Both companies had been active in China for the last two decades, at one time competing with a field of mostly Western rivals to supply a campaign worth hundreds of billions of dollars to build out the nation’s vast telecoms networks.

But as China’s economy has developed, the nation has produced its own local giants, most notably Huawei Technologies Co. Ltd., which is now the world’s largest networking-equipment maker. The combined Nokia and Alcatel Lucent would become the world’s third-biggest equipment supplier, behind Sweden’s Ericsson.

Following its formation, Nokia Shanghai Bell will have 16,000 employees, including 10,000 involved in product design working at six research and development sites across China.

“Today's agreement is historic for Nokia and for China, marking the next step of our decades-long commitment to the country and underscoring China's leading role in developing next-generation communication technologies,” Nokia President Rajeev Suri said. “Nokia Shanghai Bell will enhance our ability to innovate, helping us strengthen ties with communication service providers and expand to new, fast-growing sectors in need of high-performing networks.”

Nokia shares are up more than 40% since the merger officially closed in November on hopes that the new entity will be better poised to compete in the global marketplace.

Contact reporter Yang Ge (geyang@caixin.com)