Nokia and Siemens are to merge their telecommunications infrastructure units to form Nokia Siemens Networks, a joint venture with estimated annual revenues of €15.8 billion (US$19.9 billion) for 2005.
Nokia is contributing its Networks Business Group, while Siemens will contribute its carrier-related operations for fixed and mobile networks, the companies said. Nokia Siemens Networks will focus on manufacturing products for fixed and mobile networks.
The deal, expected to close at the end of the year, will make the new entity the third-largest telecommunications infrastructure manufacturer, the companies said. This will place it after Ericsson, and the merged units of Lucent and Alcatel.
The companies will each hold a 50 percent stake in the new venture, which will be based near Helsinki. Nokia's Executive Vice President and General Manager of Networks Simon Beresford-Wylie will become the new company's CEO.
The merger will save the two companies €1.5 billion per year, the companies estimated. Much of this will come from a 10 to 15 percent reduction in headcount from 60,000, meaning cuts of 6,000 to 7,500 jobs in the first four years following the merger, the companies said.
Falling prices for telecommunications infrastructure have pressured the sector, leading first to the merger of Lucent and Alcatel in early April. Low-cost competitors such as China's Huawei are producing similar gear for less, and also making inroads into markets such as Eastern Europe and Africa.