Nokia, Siemens team up

Amy Scott Jun 19, 2006

KAI RYSSDAL: About one in five cell phone connections these days travels over networks owned by the Finish company Nokia. Or by the German conglomerate Siemens. We learned today the two will team up. It’s a $30 billion deal. And the company they’ll create might change the way all those connections get made. Everything from voice and data to video. Marketplace’s Amy Scott starts us off.

AMY SCOTT: Nokia’s best known for its rainbow array of cell phone handsets. But it also makes the guts of the world’s mobile networks.

The new company, Nokia Siemens Networks, would become the third-largest provider of that equipment. Analyst John Mazur with Gartner says the joint venture is a symptom of merger fever. Not only have other equipment makers like Alcatel and Lucent teamed up. So have the wireless providers who buy what they make.

JOHN MAZUR: When an AT&T merges with a BellSouth, or an SBC or Verizon merges with MCI, that means fewer buyers for these vendors. So it’s definitely a plus for them to combine to help maintain margins.

Network equipment makers are also facing competition from lower cost Asian providers. Peter Jerich is with Current Analysis. He says by joining forces, Siemens and Nokia can cut costs. That means as many as 9,000 people will lose their jobs. Jerich says, in theory, consumers will eventually save money.

PETER JERICH: But that’s really not going to be happening this year, next year, or maybe even the year after. It’s more of a long-term affair.

The question now is, who’s next? Motorola now moves down a rung to become the number four network equipment provider. Analysts say one marriage candidate is Canadian Nortel Networks. After an accounting scandal, it comes with some baggage. But with consolidation in the air, investors spent the day betting on the next merger target.

In New York, I’m Amy Scott for Marketplace.

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